Case Western Reserve Law Review
Volume 25 | Issue 2
1975
State Regulation and the Federal Antitrust Laws
Leslie W. Jacobs
Follow this and additional works at: http://scholarlycommons.law.case.edu/caselrev
Part of the Law Commons
Recommended Citation
Leslie W. Jacobs, State Regulation and the Federal Antitrust Laws, 25 Cas. W. Res. L. Rev. 221 (1975)
Available at: http://scholarlycommons.law.case.edu/caselrev/vol25/iss2/3
This Article is brought to you for free and open access by the Student Journals at Case Western Reserve University School of Law Scholarly Commons.
It has been accepted for inclusion in Case Western Reserve Law Review by an authorized administrator of Case Western Reserve University School of
Law Scholarly Commons.
Case Western Reserve Law Review
Volume 25
Winter 1975
Number 2
State Regulation and the
Federal Antitrust Laws
Leslie W. Jacobs*
Regulation by a federal or state administrative agency can immunize the regulated activities from the federal antitrust laws in
certain situations. However, profound differences exist between immunity resulting from federal regulation, where the issue is congressional intent, and immunity resulting from state regulation,where
the issue is federalism. The author analyzes the Parker v. Brown
state action exemption and concludes that the decisions of many
federal courts have overextended Parker's holding. He then posits
a framework for interpretationof these cases, suggesting that it will
be useful to the courts in deciding antitrust cases in which state
action is an issue.
I.
INTRODUCTION
SEVERAL DECISIONS announced
last year have again focused the
tioners on the doctrine of primary
well as many recent decisions of
by the Supreme Court' in the
attention of antitrust practijurisdiction. These cases, as
lower federal courts, 2 have
* B.S.B.A., Northwestern University, 1965; J.D., Harvard University,
1968. Member of the Ohio Bar and of the Committee on Industrial Regulation,
Antitrust Section, American Bar Association.
1. Chicago Mercantile Exch. v. Deaktor, 414 U.S. 113 (1973); REA Express, Inc. v. Alabama Great S.R.R., 412 U.S. 934 (1973), afJ'g 343 F. Supp.
851 (S.D.N.Y. 1972); Gulf States Util. Co. v. Federal Power Comm'n, 411
U.S. 747 (1973); Federal Maritime Comm'n v. Seatrain Lines, Inc., 411 U.S.
726 (1973); Otter Tail Power Co. v. United States, 410 U.S. 366 (1973);
Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363 (1973); Ricci
v. Chicago Mercantile Exch., 409 U.S. 289 (1973).
2. Since 1973, district courts and courts of appeals have been engulfed
with primary jurisdiction cases. See, e.g., MCI Communications Corp. v.
American Tel. & Tel. Co., 496 F.2d 214 (3d Cir. 1974); Carpenters Dist.
Council v. United Contractors Ass'n, 484 F.2d 119 (6th Cir. 1973); International Ass'n of Heat & Frost Insulators v. United Contractors Ass'n, 483 F.2d
222
CASE WESTERN RESERVE LAW REVIEW
(Vol. 25:221
been concerned with three related questions: whether exclusive jurisdiction resides in an administrative agency; whether express or
implied immunity from the federal antitrust laws results from regulatory statutes or administrative action; and whether prior resort to
administrative agencies is necessary before the judicial process can
be invoked. These questions have all arisen in the context of federal
legislation and agency regulation that may conflict with -the judicial
enforcement of the federal antitrust laws in either government or
private litigation.8
Parallel questions arise in situations where state legislation and
regulation conflict with federal antitrust laws. These questions have
received less intensive consideration than they have in the federal
context. The questions are in many ways more troublesome and
challenging in the state setting because they not only involve many
of the same problems of discerning congressional intent, but also
touch upon constitutional principles.
This article will briefly review the approach of the courts in
balancing the federal interest in active competition as expressed in
the antitrust laws against other, possibly conflicting, federal interests as expressed in regulatory statutes. -It will then examine in
greater detail the efforts of the courts in the more troublesome area
of balancing the federal interest in competition against the various
state interests in the regulation of economic activity and will compare
those efforts to the federal experience.
384 (3d Cir. 1973); Price v. Trans World Airlines, Inc., 481 F.2d 844 (9th
Cir. 1973); Deaktor v. L.D. Schreiber & Co., 479 F.2d 529 (7th Cir. 1973);
Fredrickson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 5 TRADE REG. REP.
(1974-2 Trade Cas.) 1 75,227 (N.D. Ill. Sept. 9, 1974); Foremosi Int'l Tours,
Inc. v. Qantas Airways, Ltd., 5 TRADE REG. REP. (1974-2 Trade Cas.) %
75,177 (D. Hawaii July 26, 1974); In the Midwest Milk Monopolization Litigation, 5 TRADE REG. REP. (1974-2 Trade Cas.)
75,155 (W.D. Mo. June 11,
1974); Jacobi v. Bache & Co., 377 F. Supp. 86 (S.D.N.Y. 1974); United States
v. Citizens & S. Nat'l Bank, 372 F. Supp. 616 (N.D. Ga. 1974); United States
v. National Broadcasting Co., 5 TRADE REQ. REP. (1974-1 Trade Cas.) 1 74,885
(C.D. Cal. 1973); Intermar, Inc. v. Atlantic Richfield Co., 364 F. Supp. 82
(E.D. Pa. 1973); Seligson v. New York Produce Exch., 363 F. Supp. 338
(S.D.N.Y. 1973); Monsanto Co. v. United Gas Pipe Line Co., 360 F. Supp
1054 (D.D.C. 1973); Macom Prods. Corp. v. American Tel. & Tel. Co., 359
F. Supp. 973 (C.D. Cal. 1973); Citizens Util. Co. v. American Tel. & Tel. Co.,
1973-2 Trade Cas. f1 74,757 (N.D. Cal. 1973), cert. denied, 414 U.S. 1080
(1974); Executive Airlines, Inc. v. Air New England, 357 F. Supp. 345 (D.
Mass. 1973); Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 58 F.R.D. 429
(D. Hawaii 1973), afl'd, 489 F.2d 203 (9th Cir. 1973), cert. denied, 415 U.S.
991 (1974).
3. 3 K. DAvis, ADMImSTRATIVE LAw 19.05, at 25 (1958).
1975"I
ANTITRUST IMMUNITY
HI.
THE FEDERAL EXPERIENCE
Application of the antitrust laws to a federally regulated industry
involves two inevitable controversies. The first is over whether the
statutory antitrust provision in question may or should be invoked at
all. The second focuses on the question of who will decide the first.
Occasionally regulatory legislation provides for a specific exemption from the antitrust laws, usually on 'the basis of affirmative
regulation by the agency. 4 The question then becomes one of interpreting the extent of the statutory exemption and the terms of the
agency's approval. 5 In other situations the antitrust laws apply on
their face, but exclusive jurisdiction to enforce them is vested in a
regulatory commission. 6 Some types of antitrust violations, however, are completely ignored by the regulatory statutes for particular
industries. 7 It is in this area that general principles have been announced to the effect -that antitrust exemptions should not be inferred lightly8 and that the existence of "a highly regulated in4. See, e.g., Interstate Commerce Act § 5(11), 5b(9), 49 U.S.C. H9 5
(11), 5b(9) (1970) (provisions relating to horizontal rate agreements and control transactions, respectively); Federal Aviation Act § 414, 49 U.S.C. § 1384
(1970); Shipping Act § 15, 46 U.S.C. § 814 (1970); Federal Communications Act § 221(a), 47 U.S.C. § 221(a) (1970); Federal Communications Act
ch. 10, § 1, 47 U.S.C. § 222(c) (1) (1970); cf. Clayton Act § 7,15 U.S.C.
§ 18 (1970). See also Pan Am. World Airways, Inc. v. United States, 371
U.S. 296 (1963); United States v. Radio Corp. of America, 358 U.S. 334, 349
n.17 (1959). Even express exemptions must be narrowly construed.
Maryland & Va. Milk Producers Ass'n, Inc. v. United States, 362 U.S. 458, 46263 (1960); United States v. McKesson & Robbins, Inc., 351 U.S. 305, 316
(1956). Even when agency action has favored the defendant in an antitrust
suit, the defendant should still bear the burden of proving exemption from the
antitrust laws. Fredrickson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 5
75,227, at 97,534 (N.D. Ill. Sept. 9,
TRADE REG. REP. (1974-2 Trade Cas.)
1974).
5. Gordon v. New York Stock Exch., Inc., 498 F.2d 1303 (2d Cir. 1974);
United States v. Morgan Drive Away, Inc., 5 TRADE REG. REP. (1974-1 Trade
Cas.)
74,888 (D.D.C. Jan. 24, 1974); cf. Inthe Midwest Milk Monopoliza-
75,155 (W.D. Mo.
tion Litigation, 5 TRADE REG. RE. (1974-2 Trade Cas.)
June 11, 1974).
6. See, e.g., Pan Am. World Airways v.United States, 371 U.S. 296
(1963); cf. In the Midwest Milk Monopolization Litigation, 5 TRADE REG.
REP. (1974-2 Trade Cas.) 75,155 (W.D. Mo. June 11, 1974).
7. See California v.Federal Power Comm'n, 369 U.S. 482, 484-85, 487-
88 (1962); Fredrickson v.Merrill Lynch, Pierce, Fenner & Smith, Inc., 5
Sept. 9,
75,227, at 97,531 (N.D.IlL.
1974); Marnell v. United Parcel Serv. of America, Inc., 260 F. Supp. 391, 41011 (N.D. Cal. 1966) (motion to stay denied), decided on the merits, 1971
Trade Cas. 173,761 (N.D.Cal. 1971); cf. Mt.Hood Stages, Inc. v. Greyhound
Corp., 1973-2 Trade Cas. 74,824, at 95,669 (D. Ore. 1973).
TRADE REG. REP. (1974-2 Trade Cas.)
8. United States v. First City Nat'l Bank, 386 U.S. 361, 368 (1967); Cal-
224
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
dustry critical to the Nation's welfare makes the play of competition not less important but more so."9
The problem is fundamentally
one of accommodating ambiguous congressional intentions. Where
Congress has not spoken clearly, the Supreme Court has concluded
that the antitrust laws may be avoided only if, and to 'the minimum
extent that, it is necessary -tomake a regulatory scheme work.' 0
Where there is a clear statutory exemption, or where there is exclusive agency jurisdiction over an antitrust issue, the legal dispute
is well on its way to resolution. But where neither is the case, a
strategic battle looms on both the jurisdictional and substantive
fronts. The federal experience in this regard may 'be summarized
as a preference for the courts by litigants favoring competition and
a preference for an administrative forum by litigants favoring regulation.
The courts have developed the dootrine of primary jurisdiction
in -the course of deciding which forum should be given jurisdiction
over a legal dispute. The doctrine originated in the federal courts
and concerns the threshold question of whether the court should
consider a pending matter or should defer the initial determination to an administrative agency."
In simplest terms, the doctrine is merely a matter of priorities, 12 a consideration necessarily
present in any judicial action raising issues that may also properly
be considered in a proceeding before a Tegulatory agency. This
view of the doctrine emphasizes administrative expertise and the
benefits a court derives from deferring to agency determination before passing upon specialized questions.'
However, these assumpifornia v. Federal Power Comm'n, 369 U.S. 482, 485 (1962); Aloha Airlines,
Inc. v. Hawaiian Airlines, Inc., 489 F.2d 203, 206 (9th Cir. 1973), cert. denied, 415 U.S. 991 (1974); Trans World Airlines, Inc. v. Hughes, 332 F.2d
602, 606 (2d Cir. 1964), rev'd, 409 U.S. 363 (1973); cf. Otter Tail Power
Co. v. United States, 410 U.S. 366, 374-75 (1973); Georgia v. Pennsylvania
R.R., 324 U.S. 439, 456-57 (1945).
9. United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 372 (1963).
10. Silver v. New York Stock Exch., 373 U.S. 341, 357 (1963); cf. United
States v. Philadelphia Nat'l Bank, 374 U.S. 321, 350-51 (1963). Unfortunately, the Court itself has not been consistent in its adherence to that maxim.
See, e.g., note 26, infra.
11. See In the Midwest Milk Monopolization Litigation, 5 TRADE REG.
REP. (1974-2 Trade Cas.) f 75,155, at 97,179-80 (W.D. Mo. June 11, 1974);
3 K. DAvis, supra note 3, §§ 19.01-19.09, at 56-115.
12. United States Nay. Co. v. Cunard S.S. Co., 50 F.2d 83, 87 (2d Cir.
1931), alf'd, 284 U.S. 474 (1932); Quigley v. Exxon Co. U.S.A., 376 F. Supp.
342, 355-56 (M.D. Pa. 1974); United States v. National Broadcasting Co., 5
TRADE REG. REP. (1974-1 Trade Cas.) f 74,885, at 95,989 (C.D. Cal. 1973).
13. See, e.g., Chicago Merchantile Exch. v. Deaktor, 414 U.S. 113, 115
1975]
ANTITRUST IMMUNITY
225
tions have proved deceptive in many instances.1 4 Reliance upon
supposed agency expertise has tended to obfuscate the existence of
parochial bias in some regulatory situations. This theory of judicial
"benefit," founded upon the anticipation of agency advice to the
court on complicated and mysterious problems, has almost become
an excuse for swift case dispositions. A dismissal of a pending matter on the ground that primary jurisdiction resides in an administrative agency easily avoids what in many instances promises to be an
extended trial on the merits.' 5
Another rationale for holding -that an agency has primary jurisdiction 'has been the prevention of inconsistency within the
agency's area of responsibility.'
This approach to the doctrine un(1973) (commodity exchange rules); Ricci v. Chicago Mercantile Exch., 409
U.S. 289, 307 (1973) (commodity exchange rules); Far East Conference v.
United States, 342 U.S. 570, 573-75 (1952) (dual shipping rate); Quigley v.
Exxon Co. U.S.A., 376 F. Supp. 342, 355-56 (M.D. Pa. 1974); cf. Southwestern Sugar & Molasses Co. v. River Terminals Corp., 360 U.S. 411, 420-21
(1959) (exculpatory clauses in shipping contracts). It has been pointed out
that when the issue is the construction of the antitrust laws, as opposed to the
principal regulatory responsibilities of an agency, "the courts of the United
States [rather than the agencies] have over the years become the repository
of antitrust expertise." Thill Sec. Corp. v. New York Stock Exch., 433 F.2d
264, 273 (7th Cir. 1970), cert. denied, 401 U.S. 994 (1971). This observation
has been endorsed by the House Subcommittee on Commerce and Finance.
SUBCOMM. ON COMMERCE AND FINANCE OF THE HOUSE COMM. ON INTERSTATE
Am FOREIGN CoMmERcE, SEcuRIEs INusTRy STUDY, H.R. REP. No. 1519,
92d Cong., 2d Sess. 165 (1972).
14. See Securities and Exchange Comm'n v. Chenery Corp., 332 U.S. 194,
212-13 (1947) (Jackson, J., dissenting). There is often no need for regulatory
expertise since many issues are "simple question[s] of statutory interpretation ... ." California ex rel. Christensen v. FTC, 5 TRADE REG. REP.
(1974-2 Trade Cas.) 1 75,328, at 98,039 (N.D. Cal. Oct. 29, 1974).
15. See, e.g., United States v. Navajo Freight Lines, Inc., 339 F. Supp. 554
(D. Colo. 1971). The Supreme Court in the past year has directed lower
courts to stay their proceedings pending reference to an agency for what
amounts to an advisory opinion. Chicago Merchantile Exch. v. Deaktor, 414
U.S. 113 (1973); Ricci v. Chicago Mercantile Excb., 409 U.S. 289 (1973).
United States v. Michigan Nat'l Corp., 95 S. Ct. 10 (1974).
16. See, e.g., Texas & Pac. Ry. v. Abilene Cotton Oil Co., 204 U.S. 426,
440 (1907); cf. McCleneghan v. Union Stock Yards Co., 298 F.2d 659, 664
(8th Cir. 1962). But see United States v. Radio Corp. of America, 358 U.S.
334 (1959); Great Northern Ry. v. Merchants Elevator Co., 259 U.S. 285
(1922). It is of course a misconception to assume blindly that an agency promotes consistency in its own proceedings. Compare Allied Van Lines, Inc.Pooling, 39 M.C.C. 287 (1943), with Allied Van Lines, Inc.-PurchaseEvanston Fireproof Warehouse, 40 M.C.C. 557 (1946). See also Jacobs, Regulated Motor Carriersand the Antitrust Laws, 58 CORNELL L. REv. 90, 12021 (1972).
226
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
derestimates both the expertise of the courts in resolving factual disputes and their ability to construe regulatory statutes together with
other applicable law. 17 Both of these activities may in fact provide
valuable assistance and enlightenment to the agencies, and court decrees may be fashioned so as to avoid or limit troublesome inconsistencies.
The significance of the primary jurisdiction doctrine in -the antitrust context arises from the inherent -tension between the goals of
the antitrust laws and the goals of many regulatory statutes.18 A
change in forum for ,the initial proceeding often effectively changes
the ground rules and may consequently affect the ultimate outcome
of the litigation.' 9 Furthermore, any such change invoices considerable delay, including the possible dismissal of a pending case, and
may, therefore, make a court action impractical, if not impossible.20
17. A recent example of good analysis leading to a denial of primary
jurisdiction is Colorado & Wyo. Ry. v. Atchison, T. & S.F. Ry., 5 TRADE REG.
REP. (1974-2 Trade Cas.) f 75,354, at 98,126-27 (D. Colo. Oct. 2, 1974).
18. United States v. National Broadcasting Co., 5 TRADE REG. REP. (19741 Trade Cas.) f 74,885, at 95,989 (C.D. Cal. 1973).
19. The Interstate Commerce Commission illustrates this effect. Although the Commission must consider competitive principles in its interpretation of the public interest, "it is clear that . . . the most relevant consideration
is the national transportation policy, not the antitrust laws." United States v.
Navajo Freight Lines, Inc., 339 F. Supp. 554, 557 (D. Colo. 1971). See McLean Trucking Co. v. United States, 321 U.S. 67, 85-86 (1944). But see
Latin America/Pac. Coast S.S. Conference v. Federal Maritime Comm'n, 465
F.2d 542, 545-48 (D.C. Cir.), cert. denied, 409 U.S. 967 (1972) (commissions
and courts should not have different attitudes in enforcing the same laws) (dictum); Remarks of E. Zimmerman, Symposium-"Regulated" Industries and
Antitrust, 32 ANTrrRUST LJ. 215, 239-41 (1966).
20. See, e.g., the comment of Judge Goodwin in Mt. Hood Stages, Inc. v.
Greyhound Corp., 1973-2 Trade Cas. 1 74,824 (D. Ore. 1973): "Mhe litigation before the Commission has proceeded for approximately a decade with no
apparent impact upon Greyhound's conduct. If Congress intended the Interstate Commerce Act to provide a remedy for competitors injured by predatory
behavior on the part of regulated carriers, then the legislation is woefully inefficient." Id. at 95,669. Cf. United States v. National Broadcasting Co., 5
TRADE REG. RE'. (1974-1 Trade Cas.)
74,885, at 95,990 (C.D. Cal. 1973)
(as to the FCC); Walker v. United States, 208 F. Supp. 388, 392 (W.D. Tex.
1962), affd mem., 372 U.S. 526 (1963) (as to the ICC).
Dismissals were ordered in Far East Conference v. United States, 342
U.S. 570 (1952); United States v. Navajo Freight Lines, 339 F. Supp. 554 (D.
Colo. 1971); United States v. Alaska S.S. Co., 110 F. Supp. 104 (W.D. Wash.
1952). But cf. Chicago Mercantile Exch. v. Deaktor, 414 U.S. 113 (1973);
REA Express, Inc. v. Alabama Great S. R.R., 412 U.S. 934 (1973), affg 343
F. Supp. 851 (S.D.N.Y. 1972); Ricci v. Chicago Mercantile Exch., 409 U.S.
289 (1973). See generally Quigley v. Exxon Co. U.S.A., 376 F. Supp. 342,
355-56 (M.D. Pa. 1974). Compare Pan Am. World Airways, Inc. v. United
States, 371 U.S, 296 (1963), with Foremost Int'l Tours, Inc. v. Qantas Air-
1975]
ANTITRUST IMMUNITY
227
In general, agency preemption of original jurisdiction can have
four legal effects on a judicial proceeding. First, the mere initiation of an agency investigation before or during -the pendency of litigation may cause a court to defer to the agency, even without an
initial agency determination of jurisdiction or agency authorization
of the conduct that allegedly violates the antitrust laws.2 1 Second,
an opportunity is created for the agency to approve transactions and
agreements it had not previously considered and thereby to grant
immunity, after the fact, to arrangements that would have been
vulnerable .to the antitrust laws. 22 Third, the doctrines of collateral
estoppel and res judicata may apply to prohibit different conclusions
in subsequent court actions, 23 even in the absence of an express
exemption from the antitrust laws. Fourth, without invoking collateral estoppel, the court may accept without further inquiry the.
agency's recommendations, notwithstanding -that the agency has no
exclusive jurisdiction, no power to grant immunity and little sympathy for antitrust principles 2 4
ways, Ltd., 5 TRADE REr. REP. (1974-2 Trade Cas.)
75,177, at 97,285 n.6
(D. Hawaii July 26, 1974).
21. Compare United States v. Navajo Freight Lines, Inc., 339 F. Supp. 554
(D. Colo. 1971), with American Commercial Barge Line Co. v. Eastern Gas
& Fuel Associates, 204 F. Supp. 451 (S.D. Ohio 1962).
In the latter case,
primary jurisdiction was held applicable regardless of whether agency jurisdiction was actually invoked. 204 F. Supp. at 453.
22. This is true, for instance, despite the fact that a carrier's conduct prior
to ICC action may have violated § 5(4) of the Interstate Commerce Act,
49 U.S.C. § 5(4) (1970). See Interstate Investors, Inc. v. Transcontinental
Bus Sys., Inc., 310 F. Supp. 1053 (S.D.N.Y. 1970); Illinois Cent. R.R. v.
United States, 263 F. Supp. 421 (N.D. Ill.
1966), aIf'd mem., 385 U.S. 457
(1967); East Texas Motor Freight Lines, Inc.-Control & Merger-Consolidated Copperstate Lines, 109 M.C.C. 213 (1969). But see Gilbertville Trucking Co. v. United States, 371 U.S. 115 (1962). Compare Carnation Co. v.
Pacific Westbound Conference, 383 U.S. 213, 222 (1966), with Far East Conference v. United States, 342 U.S. 570, 571-72 (1952). Contra, International
Tel. & Tel. Corp. v. General Tel. & Electronics Corp., 351 F. Supp. 1153, 118182 (D. Hawaii 1973), where the court held: "When the requisite statutory
steps have not been taken [before the FCC], no immunity follows, and the
entire arsenal of antitrust weapons is left open for use by an injured party."
23. See Seatrain Lines, Inc. v. Pennsylvania R.R., 207 F.2d 255, 259 (3d
Cir. 1953); cf. Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 40203 (1940). Justice Harlan implicitly recognized this principle in United
States v. Western Pac. R.R., 352 U.S. 59 (1956), where he quoted Professor
Jaffe: "The doctrine of primary jurisdiction thus does 'more than prescribe the
mere procedural time table of the lawsuit. It is a doctrine allocating the lawmaking power over certain aspects' of commercial relations." Id. at 65, quoting Jaffe, Primary Jurisdiction Reconsidered. The Anti-Trust Laws, 102 U.
PA. L. REv. 577, 583-84 (1954).
24. See Pan Am. World Airways, Inc. v. United States, 371 U.S. 296
228
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
The dootrine of primary jurisdiction in the federal arena is in
a state of confusion. 25 Its application to a particular case can have
a substantial impact, perhaps becoming determinative of the entire
matter. But a litigant usually finds it impossible to predict whether
the court will invoke the doctrine in a particular case. 28 Authorities
(1963), where the Court dismissed a government Sherman Act complaint on
the ground that the CAB had responsibility for enforcing a statutory provision
(Federal Aviation Act § 411, 49 U.S.C. § 1381 (1970)) similar to § 5
of the Federal Trade Commission Act, 15 U.S.C. § 45 (1970), even though
the CAB could not "approve" and thereby exempt activities violating that
standard. Although the Court did not expressly say that the CAB had exclusive
jurisdiction to adjudicate antitrust questions relating to the industry it regulates,
371 U.S. at 304-05, it nevertheless found primary jurisdiction in that agency
notwithstanding the permissive language of § 411.
But see Breen Air
Freight, Ltd. v. Air Cargo, Inc., 1971 Trade Cas.
73,775 (S.D.N.Y. 1971),
ajfd, 470 F.2d 767 (2d Cir. 1972), cert. denied, 411 U.S. 932 (1973), narrowly construing the immunity granted by a prior CAB authorization and denying primary jurisdiction.
25. See United States v. National Broadcasting Co., 5 TRADE REG. REP.
(1974-1 Trade Cas.) 1174,885, at 95,989 (C.D. Cal. 1973).
26. A suit by Trans World Airlines against its former owner, Hughes Tool
Co., is a perfect example. In Transcontinental & Western Air, Inc., Control
by Hughes Tool Co., 6 C.A.B. 153 (1944), and in Trans World Airlines, Inc.,
Further Control by Hughes Tool Co., 12 C.A.B. 192 (1950), the CAB approved Toolco's acquisition of control over TWA. It subsequently modified
those orders to incorporate aircraft transactions between the companies. Following Toolco's placement of its TWA stock in a voting trust as a condition
of bank financing, new management of TWA was installed. TWA then filed
an antitrust action against Toolco on June 30, 1961, alleging, inter alia, violations of Sherman Act, §§ 1 and 2, in relation to supplying aircraft to
TWA and air carriers generally. The district court denied a motion to dismiss
the complaint on the basis of antitrust exemptions and exclusive CAB jurisdiction, Trans World Airlines, Inc. v. Hughes, 214 F. Supp. 106 (S.D.N.Y. 1963),
and the court of appeals affirmed, 332 F.2d 602 (2d Cir. 1964). The Supreme
Court granted certiorari to consider Toolco's contention that the CAB had exclusive jurisdiction, 379 U.S. 912 (1964), then dismissed the writ as improvidently granted following full briefing, 380 U.S. 248, 249 (1965). The district
court then proceeded to enter judgment for TWA based upon a discovery question, following a special master's damage award, 308 F. Supp. 679 (S.D.N.Y.
1969), 312 F. Supp. 478 (S.D.N.Y. 1970), aff'd, 449 F.2d 51 (1971). Toolco
again sought and received a writ of certiorari, 405 U.S. 915 (1972). The CAB
filed an amicus brief which pointed out that the exclusive jurisdiction question
had not been raised by Toolco in this appeal and had been opposed by the
Board in its 1964 amicus brief, that the Board had not intended to confer "antitrust or other immunity" by its orders many years before, that Pan Am.
World Airways, Inc. v. United States, 371 U.S. 296 (1963), was not pertinent,
and that "lilt appears to be conceded that the treble damage award in this
case is within the jurisdiction of the courts." Brief for CAB as Amicus Curiae
at 15, Trans World Airlines, Inc. v. Hughes, 409 U.S. 363 (1973). Nonetheless, in what can only be called a surprise decision, the Court reversed the judgment and held that, despite the CAB's own opinion as to what it had done
19751
ANTITRUST IMMUNITY
for and against invocation of primary jurisdiction exist with respect
to almost every federal agency, and arguments by analogy, legislative
history or comparable statutory language inevitably lead to citation
of precedents involving agencies and statutes other -than the ones in
point at the time.
This quagmire is the consequence of -the two problems noted at
the beginning of this Section. The first-whether to grant immunity
from the antitrust laws-has been reviewed above. The second
problem, choice of forum, has been alluded to. It was addressed
specifically in Texas & Pacific Railroad Co. v. Abilene Cotton Oil
Co. 2 7 in which the Court, speaking through Chief Justice Taft,
created the primary jurisdiction doctrine to allocate orderly decision
making between two disparate systems-regulatory bodies and the
judiciary. The first problem reflects the continuing refusal of Congress to resolve the contradictions between the policies favoring competition embodied in the antitrust laws and the various policies embodied in administrative regulation. Although administrative agencies are expected to consider effects upon competition in determining the public interest 28 even where they have no jurisdiction to enforce the antitrust laws, 29 it has been noted repeatedly that perform30
ance of that portion of their duties has been laggard at best.
or not done in the 1940's and 1950's, and despite the Court's own inaction
some 8 years earlier, the agency bad effectively preempted antitrust enforcement and the complaint should be dismissed. 409 U.S. 363, rehearing denied,
410 U.S. 975 (1973). It is perhaps even more surprising that the opinion was
written by Justice Douglas, who reached the opposite conclusion subsequently
during the same term in Otter Tail Power Co. v. United States, 410 U.S. 366
(1973), albeit in the context of another regulatory statute, Federal Power Act
§ 202(b), 16 U.S.C. § 824a(b) (1970).
27. 204 U.S. 426 (1907).
28. Gulf States Utilities Co. v. Federal Power Comm'n, 411 U.S. 747, 75860 (1973); Volkswagenwerk Aktiengesellschaft v. Federal Maritime Comm'n,
390 U.S. 261, 274 n.20 (1968); Federal Maritime Comm'n v. Aktiebolajet
Svenska Amerika Linien, 390 U.S. 238, 244 (1968); Denver & R.G.W.R.R. v.
United States, 387 U.S. 485, 492-94 (1967) (ICC); United States v. Radio
Corp. of America, 358 U.S. 334, 351 (1959) (FCC); Jacobi v. Bache & Co.,
377 F. Supp. 86, 92-93 (S.D.N.Y. 1974) (ICC).
29. Note 24 supra.
30.
P. NEAL, REPORT OF TE WhIT
HousE TAsK FORCE ON ANTITRUST
POLICY at VII-4 (July 5, 1968); G. STIGLER, PRESEDENTAL TASK FORCE, REPORT ON PRODucTIvrrY AND COMPETITON (Feb. 18, 1969); 1969 ECONOMIC
REPORT OF THE PR smENT 106-07. See also Gulf States Util. Co. v. Federal Power Comm'n, 411 U.S. 747, 762-63 (1973); Volkswagenwerk Aktiengesellschaft v. Federal Maritime Comm'n, 390 U.S. 261, 273-74 (1968); California v. Federal Power Comm'n, 369 U.S. 482, 484-85 (1962); McLean Trucking
Co. v. United States, 321 U.S. 67, 79-80 (1944); National Broadcasting Co. v.
United States, 319 U.S. 190, 222-24 (1943); Hawaiian Tel. Co. v. Federal
230
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
The courts appear now to be questioning the assumption that
finding primary jurisdiction in an administrative agency is either efficient or sufficiently responsive to the country's traditional economic
and political devotion -to competitive principles. 31 Thus, a recent
opinion reviewing a Federal Power Commission proceeding has proposed a novel twist: so far as antitrust issues are concerned, the
agency "may even, indeed, defer its disposition pending determination of relevant court litigation. . . . This would be in effect a
reverse application of the doctrine of primary jurisdiction, a doctrine
32
that has been appropriately referred to as supple and flexible.1
This approach to a case in which antitrust issues are predominant
or substantial may be effectively supplemented by agency intervention or amicus participation in the judicial proceeding ,to explain
the relevant regulatory considerations.33 A related procedure, providing for the trial court's request for a report from -an administrative agency, has also been used, at least where the agency itself
clearly had no jurisdiction to consider the antitrust issues.3 4 Even
this procedure is not always appropriate, however. A district court
has recently rejected it in a case in which an agency that lacked the
statutory authority to exempt the challenged conduct from the antiCommunications Comm'n, 498 F.2d 771, 775-77 (D.C. Cir. 1974); Marine
Space Enclosures, Inc. v. Federal Maritime Comm'n, 420 F.2d 577, 587-88
(D.C. Cir. 1969); Northern Nat'l Gas Co. v. Federal Power Comm'n, 399
F.2d 953, 975-76 (D.C. Cir. 1968); Jacobi v. Bache & Co., 377 F. Supp. 86,
96-97 (S.D.N.Y. 1974).
31. This devotion has been recognized by the courts. Northern Pac. Ry.
v. United States, 356 U.S. 1, 4 (1958).
32. Lafayette v. Securities Exch. Comm'n, 454 F.2d 941, 953-54 (D.C.
Cir. 1971), aff'd sub nom. Gulf States Util. Co. v. Federal Power Comm'n,
411 U.S. 747, rehearingdenied, 412 U.S. 944 (1973).
33. The Antitrust Division opposed a motion of the New York Stock Exchange for a federal district court to refer a pending suit against the Exchange
to the SEC. The SEC intervened at the suggestion of the court of appeals,
and the Antitrust Division noted that the Commission's participation was adequate for it to inform the court on regulatory considerations. BNA ArrrrusT
& TRADE REG. REP. No. 546, at A-7, -8 (Jan. 18, 1972); Thill Sec. Corp.
v. New York Stock Exch., 433 F.2d 264 (7th Cir. 1970), cert. denied, 401
U.S. 994 (1971). On remand in March 1972, the district court denied primary
jurisdiction on the ground that the securities laws are not sufficiently "pervasive" to require referral, 1972 Trade Cas. 1173,903, at 91,745 (E.D. Wis.
1972), and the court of appeals refused an appeal by the SEC from that order,
469 F.2d 12 (7th Cir. 1972).
34. United States v. Board of Trade, 1972 Trade Cas. 73,831 (N.D. Ill.
1972). See also Atchison, T. & S.F. Ry. v. Aircoach Transp. Ass'n, 253 F.2d
877 (D.C. Cir. 1958), cert. denied, 361 U.S. 930 (1960). Cf. Foremost Int'l
Tours, Inc. v. Qantas Airways, Ltd., 5 TRADE REG. REP. (1974-2 Trade Cas.)
75,177 (D. Hawaii July 26, 1974).
ANTITRUST IMMUNITY
1975]
trust laws had previously permitted the alleged antitrust violation "by
its own action or inaction." The court refused to remand the case
to the agency and thereby to require the plaintiff "to seek from
the regulators an admission of their failure to properly regulate." 35
mT.
STATE REGULATION
Just as federal regulation may result in antitrust immunity, so
state regulation may sometimes define an area of exempt practices
mandated by state law. Again, as in -the exclusively federal context,
the problem is two fold, but the analytical process for determining
the scope of immunity is, -theoretically if not in practice, more sophisticated because of the interplay of constitutional issues. In addition,
procedural devices for resolving or avoiding an ultimate decision
are considerably less justified.
A.
The Doctrineof Parker v. Brown
The central factor in every case of federal regulation is the
struggle -to make disparate federal legislative schemes coherent and
relatively compatible.3 6 The controversies all revolve around conflicting interpretations of legislative history and statutory construction, an effort being made 'to discern the controlling national economic policy for each case and industry. With the possible ex37
ception of insurance regulation under the McCarran-Ferguson Act,
there is no comparable difficulty of reconciling apparently inconsistent congressional intentions with regard -to the interplay between
federal antitrust statutes and state economic regulation. Congress
has simply not addressed the problem. For the first 50 years after
passage of the Sherman Act,3 8 it may have been assumed that there
39
was no problem at all.
That changed in 1943 when the Supreme Court announced in
Parker v. Brown40 that the antitrust laws were not designed to re35. Fredrickson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 5 TRADE
REG. REP. (1974-2 Trade Cas.) 1 75,227, at 97,534 (N.D. Ill. Sept. 9, 1974).
36. The following analysis of the Parker v. Brown doctrine expands upon
a previous article. Jacobs, supranote 16, at 113-17.
37. 15 U.S.C. §§ 1011-15 (1970) (exempting the "business of insurance"
from the antitrust laws to the extent that it is regulated by the states, exept
for acts of "boycott, coercion, or intimidation"). There is a related problem in
reconciling state liquor regulation pursuant to the 21st amendment. See note
106 infra.
38. 15 U.S.C. §§ 1-7 (1970).
39. But see Olsen v. Smith, 195 U.S. 332, 334-45 (1904).
40. 317 U.S. 341 (1943).
232
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
strain state action. 41 Parker involved a raisin growers' private marketing program adopted pursuant to a California statute authorizing
the establishment of market and price controls. Although the state
legislation in question paralleled the federal Agricultural Adjustment Act, which was itself in derogation of statutory antitrust policies, the opinion did not dwell on this narrow point. Nor did it
emphasize the fact that the California law imposed a regulatory
scheme. Rather, the Court acknowledged that California's prorate
program would violate the Sherman Act if carried out by private
parties, and indeed that the federal government could, under the
commerce power, prohibit programs such as California's. However,
the Court held -thatithere is "nothing in the language of the Sherman
Act or in its history which suggests that its purpose was ,to restrain a
state or its officers or agents from activities directed by its legislature." 42
The Parker doctrine is -the natural complement to the NoerrPennington doctrine. 48 The latter immunizes the seeking of govern41. Id. at 350-51.
42. Id.
43. In 1961 the Supreme Court announced in Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961),
that "no violation of the [Sherman] Act can be predicated upon
mere attempts to influence the passage or enforcement of laws." Id.
at 135. The Court extended this holding to the conclusion that "the
Sherman Act does not prohibit two or more persons from associating together in an attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce
a restraint or a monopoly." Id. at 136.
The apparent rationale for this policy was a combination of the
constitutional right to petition the government and the government's
inherent authority to restrain competition through legislation and law
enforcement. This justification for certain concerted actions by competitors was expressed more clearly four years later in United Mine
Workers of America v. Pennington, 381 U.S. 657 (1965), where the
Court rejected a test based on good faith:
Joint efforts to influence public officials do not violate the
anti-trust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as
part of a broader scheme violative of the Sherman Act.
Id. at 670. Thus, the primary purpose for seeking governmental action might be either to obtain a legitimate regulation or restriction
(for example, safety) with anticompetitive side effects, [to replace
competitive restraints with more palatable "regulation,"] or to achieve
the elimination of a competitor. The [last] was more clearly the case
in the Penningtonsituation.
Jacobs, supra note 16, at 108.
It is obvious that the encouragement to commercial competitors to combine
in efforts to influence governmental action under the Noerr-Pennington umbrella varies in direct relation to the extent of antitrust immunity for anticompetitive activities that is available under Parker v. Brown. If only aggressive,
19751-
ANTITRUST IMMUNITY
mental action; -the former immunizes the governmental action itself.
It is of course possible for a situation to involve only one of the doctrines. An incipient inducement of governmental action involves
only a Noerr-Pennington issue, and an unsolicited governmental
action benefitting a competitor involves reliance solely on Parker.
But the usual case, where a competitor has been successful in obtaining some beneficial governmental involvement in a competitive
relationship, will raise both issues.
With remarkably little analysis, the Parker doctrine has been
invoked repeatedly to provide the equivalent of 'federal statutory antitrust exemption for state laws, a result never contemplated in the
Court's original opinion. In two recent cases, regulated utilities successfully invoked the doctrine as a defense against private actions
by competitors. In Gas Light Co. of Columbus v. Georgia Power
Co.,44 the Fifth Circuit applied the traditional version of the doctrine
to immunize from antitrust attack promotional programs which had
previously been approved by orders of the state regulatory agency. 45
Shortly thereafter, in Washington Gas Light Co. v. Virginia Electric
& Power Co.,4 6 the Fourth Circuit went well beyond previous notions
of the Parkerexemption by holding that the failure of a state agency
to consider the challenged practices constituted implied consent and
therefore state action.4 7 The significance of this expansion of
Parkeris highlighted by the revelation that in 1970, four years after
commencement of ithe utility's program that was challenged in this
case and after the district court had made its decision,4 8 the state
regulatory commission prohibited further such activities in its first
proceeding to examine them.4 9 The circuit court chided the plaintiff
for its failure to protest to the agency when the program first started50
and announced that the Parker doctrine applies to all violations
affirmative state regulation provides a reliable shield, private interests will be
less likely to urge governmental action than if less effective regulation is sufficient for Parkerpurposes.
44. 440 F.2d 1135 (5th Cir. 1971), cert. denied, 404 U.S. 1062 (1972).
45. This situation compares in the federal experience to immunity resulting from prior agency action. See note 4 supra.
46. 438 F.2d 248 (4th Cir. 1971).
47. Accord, Business Aides, Inc. v. Chesapeake & Potomac Tel. Co., 339
F. Supp. 1391 (E.D. Va. 1972) (dictum), affd, 480 F.2d 754 (4th Cir. 1973);
contra, United States v. Oregon State Bar, 43 U.S.L.W. 2234 (D. Ore. Nov. 25,
1974).
48. 309 F. Supp. 1119 (E.D. Va. 1970).
49. 438 F.2d at 250 n.2, 252.
50. See Section MuB infra.
234
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
"within the ambit of regulation," -whether or not regulation occurs.5 1
Clearly, the Virginia Electric decision, equating state action with
passive administrative acquiescence or even ignorance, stretches
Parker to the breaking point 52 -and disregards prior authorities rejecting such a premise in other contexts. 5"
51. 438 F.2d at 252.
52. International Tel. & Tel. Corp. v. General Tel. & Electronics Corp.,
351 F. Supp. 1153, 1203 n.129 (D. Hawaii 1972) (dictum). But since the
decision in Virginia Electric, the Fourth Circuit has decided Goldfarb v. Virginia State Bar, 497 F.2d 1 (4th Cir.), cert. granted, 43 U.S.L.W. 3246 (U.S.
Oct. 29, 1974), in which that court reaffirmed the doctrine it had announced in
Virginia Electric-that the silence of a state regulatory agency concerning the
actions of the regulated entity implies consent to those actions and that, therefore, state action exists. In addition, a district court in that circuit has found
that agency ignorance of the practice complained of, fostered by lack of notice
to it from a competitor, is within the scope of the Parker doctrine. Business
Aides, Inc. v. Chesapeake & Potomac Tel. Co., 339 F. Supp. 1391 (E.D. Va.
1972) (dictum), aff'd, 480 F.2d 754 (4th Cir. 1973). This Fourth Circuit
aberration has been expressly rejected in the most recent case to consider it.
United States v. Oregon State Bar, 43 U.S.L.W. 2234 (D. Ore. Nov. 25, 1974).
One of the decisions in the landmark class action case, Eisen v. Carlisle
& Jacqueline, 54 F.R.D. 565 (S.D.N.Y. 1972), rev'd on other grounds, 479
F.2d 1005 (2d Cir. 1973), vacated on other grounds, 417 U.S. 156
(1974), casts doubt on the logic of granting an exemption despite a finding
of nonregulation. The defendants, odd-lot traders and the New York Stock
Exchange, argued immunity and/or primary jurisdiction of the SEC on the
grounds that regulation of odd-lot trading was within the scope of the Securities
Exchange Act of 1934, 15 U.S.C. §§ 78a et seq. (1970), and of the self-regulatory powers of the Exchange pursuant to that Act. Judge Tyler stated:
[I]f the Exchange had exercised its self-regulatory powers by establishing rules in respect to odd-lot differentials, I would assume arguendo that review of such rules might be beyond the powers of this
court. But the Exchange, by its own admission, failed to establish
any rules or regulations with regard to odd-lot differentials. To put
the matter bluntly, it is unlikely that this failure or "benign acquiescence" can be considered to constitute regulation mandated by the
Act.
Id. at 572. See also International Tel. & Tel. Corp. v. General Tel. & Electronics Corp., 351 F. Supp. 1153, 1182 (D. Hawaii 1972); note 22 supra.
53. See, e.g., United States v. Borden Co., 308 U.S. 188 (1939), where
the Court considered unapproved actions of milk marketers:
It will be observed that the District Court attributes this [antitrust immunity] to the Agricultural Marketing Agreement Act per se,
that is, to its operation in the absence, and without regard to the
scope and particular effect, of any marketing agreements made by the
Secretary of Agriculture or of any orders issued by him pursuant to
the Act. In the opinion of the court below, the existence of the authority vested in the Secretary of Agriculture, although unexercised,
wholly destroys the operation of § 1 of the Sherman Act with respect
to the marketing of agricultural commodities.
We are of the opinion that this conclusion is erroneous. No provision of that purport appears in the Agricultural Act. While effect
is expressly given, as we shall see, to agreements and orders which
19751
ANTITRUST IMMUNITY
The Fifth Circuit panel in the Georgia Power case distinguished
the prior holding of another panel of that court in Woods Exploration & Producing Co. v. Aluminum Company of America,5 4 which
had refused to apply the Parker doctrine to a state commission's orders controlling natural gas production. The Woods holding presented two propositions. First, and most important, it contradicted
the Virginia Electric position by stating that all private action within
a state regulatory framework is not ipso facto state action, even
where state remedies specifically apply to the defendant's conduct.
Second, in the light of a finding that defendants supplied false information to a regulatory body, the court refuted the presumption
of state action: "[D]efendants' conduct here can in no way be said
to have become merged with the action of the state since the Commission neither was the real decisionmaker [because it had to rely
on defendants for its operative data] nor would have intended its
order to be based on false facts."5 5 The Georgia Power panel did
not embrace the first aspect of the Woods holding, which rejects outright Virginia Electric, but maintained its neutrality by finding it
unnecessary to go as far as VirginiaElectric. The absence of allegations of falsehood in Georgia Power was considered sufficient to distinguish it from Woods and to justify application of the Parker doctrine.
Another decision squarely in conflict with the spirit of Virginia
Electric and distinguished on its facts by Georgia Power is George
R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc.,56 in which the
may validly be made by the Secretary of Agriculture, there is no suggestion that in their absence, and apart from such qualified authorization and such requirements as they contain, the commerce in agricultural commodities is stripped of the safeguards set up by the AntiTrust Act and is left open to the restraints, however unreasonable,
which conspiring producers, distributors and their allies may see fit
to impose. We are unable to find that such a grant of immunity by
virtue of the inaction, or limited action, of the Secretary has any
place in the statutory plan. We cannot believe that Congress intended to create "so great a breach in historic remedies and sanctions."
Id. at 197-98 (footnote omitted).
54. 438 F.2d 1286 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972)
(antitrust immunity unjustified when gas producers filed false reports with state
regulatory commission which relied on them to reduce production of other
producers).
55. 438 F.2d at 1295. But see Okefenokee Rural Elec. Membership Corp.
v. Florida Power & Light Co., 214 F.2d 413 (5th Cir. 1954). The status of
false information under the Noerr-Pennington doctrine may be somewhat
higher than it appears to be for Parker doctrine purposes. -See Jacobs, supra
note 16, at 111-13.
56. 424 F.2d 25 (1st Cir.), cert. denied, 400 U.S. 850 (1970).
236
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
First Circuit refused to exempt from the antitrust laws the action of
a public official or agent when that action served to undermine the
purpose of a state law. In Paddock Pool the defendant engaged
in an elaborate program to have architects hired by public bodies
include specifications that only the defendant's products could meet
in bid terms adopted by those public bodies. Even though the act
of recommending defendant's specifications was that of a quasi-official and the act of promulgating the anticompetitive requirement
was that of a governmental unit, the court found both acts to be
inconsistent with the underlying purpose of the competitive bidding
law authorizing the actions. Because that law's purpose was consistent with the antitrust laws, the Parker doctrine was inapplicable
since the state action was not intended to diminish competitive standards. The Paddock Pool court would recognize as within -the ambit
of -the Parker doctrine only government action that "deliberately at57
tempts to provide an alternate form of public regulation."
Whether challenged activities constitute genuine state action is
essentially a factual inquiry conducted on a case by case basis. Although -the emphasis on particular facts may vary, most decisions
are basically efforts to determine whether -the pattern is state action
with ancillary private participants or "individual action masquerading as state action." 5 8 The degree of antitrust zeal of a court will
usually be reflected in its examination of -the facts and in the weight
it accords to each in the balance.
A point more fundamental to the allowance of an exemption than
the mere finding of state action was raised in Hecht v. Pro-Football,
Inc.59 Where entirely legitimate state action does in fact exist,
the inquiry should not end with an assumption of immunity under
Parker v. Brown, but should proceed to consider whether the state
action may continue without contravening federal antitrust laws,
which, under the federal commerce power, constitutionally take precedence over state 'legislation.60 The distinction between private ac57. 424 F.2d at 30. See also Azzaro v. Town of Bradford, 5 TRADE REG.
REP. (1974-2 Trade Cas.) 75,337 (D. Conn. Nov. 4, 1974).
58. Ashville Tobacco Bd. of Trade, Inc. v. FTC, 263 F.2d 502, 509 (4th
Cir. 1959). See also Continental Ore Co. v. Union Carbide & Carbon Corp.,
370 U.S. 690 (1962).
59. 444 F.2d 931 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047 (1972).
It should be noted that Hecht involved action taken by the District of Columbia so that to a certain extent the problem of ascertaining congressional intent
was involved in the court's decision; to that extent, the problem of federalism
implicit in Parkermay not exist as such in Hecht.
60. 444 F.2d at 935; accord, International Tel. & Tel. Corp. v. General
Tel. &Electronics Corp., 351 F. Supp. 1153, 1202-03 (D.Hawaii 1972).
19751
ANTITRUST IMMUNITY
tion and governmental action for exemption purposes involves, then,
a second and more subtle distinction between governmental action
and constitutionally permissible governmental action. A simple use
of labels should not suffice.
The cases purportedly concerning the Parker doctrine reflect a
casual conglomeration of holdings which should be clearly distinguished to promote sound constitutional decisions and clear antitrust
precedents. The categories to be recognized are: (1) actual state
or local 0 ' governmental operation of an economic activity, (2) governmental regulation of private economic activity, and (3) governmental approval of private economic activity. Each category should
also be evaluated as to (a) consistency with the federal antitrust
laws, (b) inconsistency with those laws but consistency with some
other federal policy, or (c) total antipathy to federal policies.
1.
Governmental Operationof Economic Activity
Category (1) appears to be within the broad language of
Parker that refers to the activities of "a state or its officers or agents
. . . directed by its legislature."'62 There are discernible gradations
even within this category.
Occasionally a governmental entity, such
61. "Since a state rarely acts except through one or more of its political
subdivisions, if governmental immunity is to have any but the most limited efficacy it must be available to protect the political subdivisions of the state from
antitrust liability." Murdock v. City of Jacksonville, 361 F. Supp. 1083, 1092
(M.D. Fla. 1973). But see Azzaro v. Town of Bradford, 5 TRADE REG. REP.
(1974-2 Trade Cas.) 75,337 (D. Conn. Nov. 4, 1974).
62. 317 U.S. at 350-51. At least one court has viewed the Parkerauthorities as limited to just this category where "the legislature create[s] the entity involved or endowts] it with governmental character . . . ." Travelers
Ins. Co. v. Blue Cross, 298 F. Supp. 1109, 1111 (W.D. Pa. 1969). But compare
New Mexico v. American Petrofina, Inc., 5 TRADE REG. REP. (1974-2 Trade
Cas.) 75,179 (9th Cir. July 17, 1974), where the court reserved the question
in part: "[']n addition, we express no view concerning the circumstances in
which state agents, officers, and employees acting in their official capacities
are subject to the Sherman Act," id. at n.19, with California ex rel Christensen
v. FTC, 5 TLADE REG. REP. (1974-2 Trade Cas.) f 75,328 (N.D. Cal. Oct. 29,
1974) where the court went further and concluded: "There is a substantial
probability that: (1) there is no jurisdiction in the Federal Trade Commission
to proceed against the State of California, its instrumentalities, its agencies, or
its officers in their official capacities [citing Parker and New Mexico v. American Petrofina, Inc., supra]; and (2) the FTC may not avoid this fact by
seeking to proceed instead against a private corporation aiding the State in
carrying out the conduct in question [citing E. W. Wiggins Airways, Inc. v.
Massachusetts Port Auth., 362 F.2d 52 (1st Cir. 1966)]," id. at 98,039, and
the language in Fox v. James B. Beam Distilling Co., 5 TRAnn REG. REP.
(1974-2 Trade Cas.)
75,335 (S.D. Ind. Sept. 25, 1974), quoted at note 72,
infra.
238
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
as a city, will operate an economic activity along with other func-
tions. 63 Some governmental entities, such as port authorities, are
64
established solely to maintain an economic activity.
But even in the category (1) situation, which is conceptually
close to state sovereign immunity, 65 three factors may still militate
against exemption. First -is the question whether the activity subject ito attack is within the contemplation of .the state's legislative
mandate. 66 Second is 'the element of intent, that is whether the
state agency or official acted knowingly so that "the anti-competitive consequence is truly the action of the state,""' even where the
type of act is clearly within -the legislative authorization. The most
frequently alleged defeat of this variety concerns inaccurate or in63. Murdock v. City of Jacksonville, 3.61 F. Supp. 10.83, 1092 (M.D. Fla.
1973).
64. See Padgett v. Louisville & Jefferson County Air Bd., 492 F.2d 1258
(6th Cir. 1974); Ladue Local Lines, Inc. v. Bi-State Dev. Agency, 433 F.2d
131 (8th Cir. 1970); E.W. Wiggins Airways, Inc. v. Massachusetts Port Authority, 362 F.2d 52, 55 (1st Cir.), cert. denied, 385 U.S. 947 (1966); cf.
Hecht v. Pro-Football, Inc., 444 F.2d 931, 938-40 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047 ,(1972).
65. Cf. International Tel. & Tel. Corp. v. General Tel. & Electronics
Corp., 351 F. Supp. 1153, 1199-1200 (D. Hawaii 1972). See also Alabama
Power Co. v. Alabama Elec. Cooperative, Inc., 394 F.2d 672, 680, 685 (5th
Cir.) (Godbold, J., dissenting), cert. denied, 393 U.S. 1000 (1968). Trans
World Associates, Inc. v. City and County of Denver, 5
TRADE REG. REP.
(1974-2 Trade Cas.) 175,293 (D. Colo. Oct. 15, 1974). But see Fox v. James
B. Beam Distilling Co., 5 TRADE REG. REP. (1974-2 Trade Cas.) If 75,335, at
98,060 (S.D. Ind. Sept. 25, 1974).
66. Goldfarb v. Virginia State Bar, 497 F.2d 1 (4th Cir.) cert. granted, 43
U.S.L.W. 3246 (U.S. 1974); Fox v. James B. Beam Distilling Co., supra mote
65; Allegheny Uniforms v. Howard Uniform Co., 5 TRADE REG. REP. (1974-2
Trade Cas.) 1 75,405 (W.D. Pa. Nov. 21, 1974); see text accompanying note
57 Yupra. Compare Padgett v. Louisville & Jefferson County Air Bd., 492
F.2d 1258, 1260 (6th Cir. 1974), with Hecht v. Pro-Football, Inc., 444 F.2d
931, 938 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047 (1972). See also
United States v. Otter Tail Power Co., 331 F. Supp. 54 (D. Minn. 1971), af'd
in part, 410 U.S. 366 (1973); Travelers Ins. Co. v. Blue Cross, 298 F. Supp.
1109, 1111 (W.D. Pa. 1969).
67. Woods Exploration & Producing Co. v. Aluminum Co. of America,
438 F.2d 1286, 1294 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972). See
text accompanying note 55 supra.
[1]t is necessary to determine whether the anti-competitive result
actually is a goal of the state entitled to the state's immunity rather
than a private group masquerading under the banner of '"state action."
Such a determination necessarily involves an inquiry into legislative
motives, and courts are understandably reluctant to apply the state's
immunity to private parties without a clear indication by the state's
legislature that the anti-competitive results have its sanction.
New Mexico v. American Petrofina, Inc., 5 TRADE REG. REP. (1974-2 Trade
Cas.)
75,179, at 97,311 (9th Cir. July 17, 1974) (dictum). But see Murdock v. City of Jacksonville, 361 F. Supp. 1083, 1089-91 (M.D. Fla. 1973).
1975]
ANTITRUST IMMUNITY
sufficient information on which to base a valid decision. 8 And
third, some decisions involving the Noerr-Penningtondoctrine provide
a basis for suspicion that exemptions may be less than automatic
for activities by a governmental agency in a purely proprietary capacity. 9 This exception is consistent with holdings limiting govern7
mental immunity in other contexts. 70 Thus the court in Hecht v.
Pro-Football,Inc., which was generally hostile to the Parkerphilosophy, accepted antitrust immunity for those instances in which "the
state has either created or contracted with a corporate entity, which
became the state's sole instrumentality in carrying out what clearly
would otherwise be a govermnental function."71 An almost forgotten qualification by the Court in Parker v. Brown supports the
need for careful consideration of the proprietary activity exception
to the state action exemption: "we have no question [presented
in this case] of the state . . . becoming a participant in a private
-72
agreement or combination by others for restraint of trade ....
68. Woods Exploration & Producing Co. v. Aluminum Co. of America,
438 F.2d 1286 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972).
69. Dealing with governmental entities as potential customers or business
associates is decidedly different from seeking regulatory relief or assistance
from the government in its lawmaking capacity. The court in George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25 (1st Cir.), cert. denied, 400 U.S. 850 (1970), did not allow the label "government" to immunize
purely commercial transactions with public officials. Id. at 32-33. See also
Hecht v. Pro-Football, Inc., 444 F.2d 931 (D.C. Cir. 1971), cert. denied, 404
U.S. 1047 (1972); Twin City Sportservice, Inc. v. Charles 0. Finley & Co.,
365 F. Supp. 235, 255 (N.D. Cal. 1972). But cf. Howard v. State Dep't of
Highways, 478 F.2d 581, 585 (10th Cir. 1973); Sun Valley Disposal Co. v.
Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969); Alabama Power Co.
v. Alabama Elec. Cooperative, Inc., 394 F.2d 672, 676-77 (5th Cir.), cert. denied, 393 U.S. 1000 (1968); United States v. Johns-Manville Corp., 259 F.
Supp. 440 (E.D. Pa. 1966) (the government did not appeal). Contra, Trans
World Associates, Inc. v. City and County of Denver, 5 TRADE REG. REP.
(1974-2 Trade Cas.) f 75,293, at 97,899-900 (D. Colo. Oct. 15, 1974).
70. E.g., Casner & Fuller, Municipal Tort Liability in Operation, 54 HARV.
L. REV. 437 (1941); Seasongood, Municipal Corporations: Objections to the
Governmental or ProprietaryTest, 22 VA. L. REv. 910 (1936).
71. 444 F.2d 931, 938 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047
(1972) (emphasis added). See also E.W. Wiggins Airways, Inc. v. Massachusetts Port Authority, 362 F.2d 52, 55 (1st Cir.), cert. denied, 385 U.S.
947 (1966). Contra, New Mexico v. American Petrofina, Inc., 5 TRADE REG.
REP. (1974-2 Trade Cas.) 1[ 75,179, at 97,312 (9th Cir. July 17, 1974):
"Our conclusion that a state is not covered by sections 1 and 2 of the
Sherman Act is inconsistent with the rationale of Hecht. . . . Wle disagree
with the implication of Hecht that a state may sometimes be liable."
72. 317 U.S. at 351-52. Azzaro v. Town of Bradford, 5 TRADE Rno. REP.
(1974-2 Trade Cas.)
75,337 (D. Conn. Nov. 4, 1974). The good faith of
this consideration was challenged by plaintiff, but not seriously entertained by
240
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
2. Governmental Regulation of PrivateEconomic Activity
Within the suggested conceptual framework, the holding of
Parker v. Brown is of literal precedential value only for category
(2) situations. 3 The program subject to antitrust attack in Parker
was in fact operated and enforced by state machinery. The courts
have often overlooked the fact that the plaintiffs attack in Parker
was not against violations of federal law by regulated private competitors but, rather, upon the state regulatory scheme itself as a violation of federal law. Mr. Parker, after all, was not a raisin grower;
rather he was the State Director of Agriculture charged with enforcement of the challenged California Agricultural Prorate Act. The
holding is probably most accurately stated that, in the absence of
clear congressional intent, the courts will not invoke antitrust principles to restrain the process of state economic regulation.7 4 Perthe court, in Metro Cable Co. v. CATV of Rockford, Inc., 375 F. Supp. 350
(N.D. Ill. 1974), where the court acknowledged that "[1local government units
such as City Councils and County Boards are seldom completely free from
personal interest and outside influences...." Id. at 358. It was specifically
pointed out in Murdock v. City of Jacksonville, 361 F. Supp. 1083, 1093 (M.D.
Fla. 1973), that even where governmental immunity protects the governmental
entity, "[c]learly the immunity . . . is not available to the private corporate
entity . . ." dealing with the government; contra, Trans World Associates, Inc.
v. City and County of Denver, 5 TRADE REG. REP. 1175,293, at 97,900 (D. Colo.
Oct. 15, 1974). Where the state law does not sanction conduct violating the
antitrust laws, Parker does not apply. Thus in a case of the horizontal price
fixing of liquor:
The allegations of this cause assert that the [industry] defendants
formed and the ABC [state commission] acquiesced in an illegal
combination to fix prices, the exact situation the Court in Parker
decried ....
The complaint also states a claim against the ABC. . . . These
cases demonstrate that when state employees or agencies act outside
the scope of their authority, or unconstitutionally, the immunity provided to the state by the Eleventh Amendment is lifted. ....
• . . If proved to be as alleged, the complaint would show that
the ABC has acted not only beyond the powers given it pursuant to
state law, but also as a coconspirator to violate the federal antitrust
laws.
Fox v. James B. Beam Distilling Co., 5 TPzADE Rno. REP. (1974-2 Trade Cas.)
75,335, at 98,060 (S.D. Ind. Sept. 25, 1974).
73. Accord, Hecht v. Pro Football, Inc., 444 F.2d 931 (D.C. Cir. 1971),
cert. denied, 404 U.S. 1047 (1972).
74. Thus, the attack upon a defendant city council's action in granting a
cable television franchise was properly dismissed upon the square authority of
Parker. Metro Cable Co. v. CATV of Rockford, Inc., 375 F. Supp. 350, 359
(N.D. Ill. 1974). But cf. Goldfarb v. Virginia State Bar, 497 F.2d 1, 6 (4th
Cir.), cert. granted, 43 U.S.L.W. 3246 (U.S. Oct. 29, 1974), where the court
interpreted Parkerto hold the declared purpose of the California Agricultural
Adjustment Act, namely to conserve agricultural wealth and to prevent economic waste, to be a benefit for the public and therefore a factor in deciding
19751
ANTITRUST IMMUNITY
haps a fair statement of the corollary is that, if a state is free to impose anticompetitive economic regulation, then a regulated enterprise may be required to accede to the state's requirements without
exposure to federal antitrust liability as a consequence.7 5 This statement of the rule, however, should always be tempered with the observation that Parker -talks only about "official" action and not
75
about mere legislative recognition of private regulation. a
3.
Governmental Approval of PrivateEconomic Activity
Under this analysis of Parker it would seem that no exemption
is applicable when there is no actual regulation 76 or when regulaition is not necessarily inconsistent with antitrust compliance. 77 But
the more elusive point, which even fewer courts have recognized, is
that Parker v. Brown is not authority at all for a category (3) exemption. The Court issued a specific warning to that effect when it
stated that ". . a state does not give immunity to those who violate
that the Act is a valid state action. But the conclusion reached in Goldfarb that
the minimum fee schedule for lawyers is part of a scheme of ethical regulation
intended primarily to benefit the public (and that the law is a "learned profession and therefore exempt from the antitrust laws"), suggests the question
whether legislative purpose will be determined solely on the basis of the label
used by the legislature, particularly when a specific item such as a minimum
fee schedule may not in reality provide a direct benefit to the public. Compare
id. at 9-10 (majority opinion) with id. at 21 (dissent). See also United States
v. Oregon State Bar, 43 U.S.L.W. 2234 (D. Ore. Nov. 25, 1974) (defendants'
motion for summary judgment denied and Goldfarb not followed).
75. Cf. Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506,
513 (6th Cir. 1972), citing Georgia v. Pennsylvania R.R., 324 U.S. 439, 453
(1945), and McClellan v. Montana-Dakota Util. Co., 104 F. Supp. 46 (D.
Minn. 1952), affd, 204 F.2d 166 (8th Cir.), cert. denied, 346 U.S. 825
(1953).
75a. United States v. Oregon State Bar, 43 U.S.L.W. 2234 (D. Ore. Nov.
25, 1974).
76. Cf. Petitioner's Brief for Certiorari at 13-15, Ohio AFL-CIO v. Insurance Rating Bd., 409 U.S. 917 (1972), denying cert. to 451 F.2d 1178 (6th
Cir. 1971), where Petitioner argued that there was no enforcement of the regulatory scheme in practice. Contra, Washington Gas Light Co. v. Virginia
Electric & Power Co., 438 F.2d 248, 252 (4th Cir. 1971), and notes 46-53
supra and accompanying text. See generally Goldfarb v. Virginia State Bar,
497 F.2d 1 (4th Cir.), cert. granted, 42 U.S.L.W. 3246 (U.S. Oct. 29, 1974),
where the court distinguished between the Virginia State Bar Association and
the Fairfax County Bar Association.
77. See, e.g., Macom Prods. Corp. v. American Tel. & Tel. Co., 359 F.
Supp. 973, 976-77 (C.D. Cal. 1973); cf. Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Ware, 414 U.S. 117, 136-37 (1973). See also Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F.2d 1286, 1302 (5th
Cir. 1971), cert. denied, 404 U.S. 1047 (1972).
242
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
the Sherman Act by authorizing them to violate it, or by declaring
that their action is lawftl .... -"78 Thus a firm line must be drawn
between action commanded by a state and action merely approved
or tolerated. 79 The determination of this line between categories
(2) and (3) will depend upon the type of regulation in question,
the stringency and origin of the regulatory requirements and the
nature of the regulator's decisionmaking.
Actions or orders by state agencies to authorize or accept decisions previously made by private parties are by definition in category (3). When such a sequence of events occurs, it is illogical for
a regulated person to contend that he acted pursuant to governmental compulsion. 8 0 This is particularly obvious when there has been
no regulatory agency consideration of a matter prior to antitrust
attack. 8 ' Less glaring, yet still quite apparent, are the defects in
immunity claims based on permissive regulations such as those that
78. 317 U.S. at 351.
79. Ashville Tobacco Bd. of Trade, Inc. v. Federal Trade Commission, 263
F.2d 502, 509 (4th Cir. 1959); United States v. Oregon State Bar, 43 U.S.L.W.
2234 (D. Ore. Nov. 25, 1974): "Second, the court held [in Goldfarb]
that the Virginia state court's inaction with regard to specifically approving or
disapproving fee schedules should be construed as active supervision by independent state officials since the court has the authority to regulate the bar.
I do not think that such consent by silence meets the Parker test;" Fox v.
James B. Beam Distilling Co., 5 TAimn REG. REP. (1974-2 Trade Cas.) 1
75,335 (S.D. Ind. Sept. 25, 1974); United States v. Morgan Drive Away, Inc.,
5 TADE REG. REP. (1974 Trade Cas.)
74,888 (D.D.C. Jan. 24, 1974); Macom Prods. Corp. v. American Tel. & Tel. Co., 359 F. Supp. 973, 976-77
(C.D. Cal. 1973); Marnell v. United Parcel Serv. of America, Inc., 260 F.
Supp. 391, 403 (N.D. Cal. 1966). See also Simmons & Fornaciari, State Regulation as an Antitrust Defense: An Analysis of the Parkerv. Brown Doctrine,
43 U. CIN. L. REV. 61 (1974).
80. See, e.g., Mamell v. United Parcel Serv. of America, Inc., 260 F. Supp.
391, 406-10 (N.D. Cal. 1966); cf. Allstate Ins. Co. v. Lanier, 361 F.2d 870
(4th Cir. 1966), where the court construed uniform insurance rates and standards promulgated by private parties as state action. However, this holding involves the statutory McCarran-Ferguson Act insurance regulation test and is
not truly a Parker v. Brown case. However, in Goldfarb v. Virginia State
Bar, 497 F.2d 1, 6 n.11 (4th Cir.), cert. granted, 42 U.S.L.W. 3246 (U.S.
Oct. 29, 1974), the court stated:
It is interesting to note that [Parker v. Brown] was not a case where
individuals initially decided to take action, conspired to regulate competition and prices in the industry, and then received governmental
approval through legislative action. On its surface such a sequence
of events would appear to be an attempt by a state to grant immunity
to those violating the Sherman Act. Indeed such "after the fact" legislation may create a rebuttable presumption that the state was attempting to camouflage individual action as state action.
See also id. at 8 n.19. See generally cases cited at note 94 infra.
81. Text accompanying notes 46-52 supra.
1975]'
ANTITRUST IMMUNITY
often arise from the filing of privately developed tariffs with a state
public utility commission 82 or from agency approval- of merger proposals.8 3 In these circumstances there is little or no agency insistence upon specific acts or policies; the practices or rates originate
with the regulated industries.
One step further removed from the obvious case is the situation
where a state agency intends to regulate but has its purposes
thwarted or deflected by inaccurate information or deception on the
part of the regulated industry or competitor. Here again, although
governmental directions may indeed have been issued, the inherent
deficiencies in such state action preclude immunity based upon the
presumption of an intent -to regulate in the public interest.8 4 Next
along the spectrum of category (3) non-exemption cases, progressing
toward the line separating category (3) from category (2), is the
situation where -the state agency's processes are so casual as to refute the existence of active xegulation.8 5
Finally, and perhaps most arguable, is the case of active agency
review that does not include a study and evaluation of the anticompetitive consequences of ,the pertinent regulatory action. The
argument that this oversight precludes exemption is alluded to in
International Telephone & Telegraph Corp. v. General Telephone
& Electronics Corp.,8 6 Hecht v. Pro-Football,Inc.87 and Travelers
MoreInsurance Inc. v. Blue Cross of Western Pennsylvania.8s
over, at least one public utilities commission opinion demonstrates
82. Macom Prods. Corp. v. American Tel. & Tel. Co., 359 F. Supp. 973
(C.D. Cal. 1973). Contra, Gas Light Co. of Columbus v. Georgia Power Co.,
440 F.2d 1135 (5th Cir. 1971). However, the holding in Georgia Power (see
text accompanying notes 44-57 supra) has been called an "unwarranted hyperextension of Parker." International Tel. &Tel. Corp. v. General Tel. & Electronics Corp., 351 F. Supp. 1153, 1203 n.129 (D. Hawaii 1972).
83. United States v. Pacific Southwest Airlines, 358 F. Supp. 1224 (C.D.
Cal.), cert. dismissed by stipulation of parties sub nom. California v. United
States, 414 U.S. 801 (1973).
84. Woods Exploration & Producing Co. v. Aluminum Co. of America,
438 F.2d 1286 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972).
85. Macom Prods. Corp. v. American Tel. & Tel. Co., 359 F. Supp. 973
(C.D. Cal. 1973).
86. 351 F. Supp. 1153, 1201-03 (D. Hawaii 1972). It is arguable that
this case may be more appropriately classified as one rejecting exemption based
on permissible rather than compulsory transactions. See United States v. Pacific Southwest Airlines, 358 F. Supp. 1224 (C.D. Cal. 1973), for this treatment of another merger case.
87. 444 F.2d 931, 935 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047
(1972).
88. 298 F. Supp. 1109, 1111 (W.D. Pa. 1969).
244
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
the broad impact on -the Parker doctrine which this theory would
have. Based on the interpretations of Parker v. Brown in Georgia
Power 9 and Virginia Electric9" -the opinion concludes that the Commission is not to consider challenges to tariffs made before it on
grounds of alleged antitrust violations. 91 If the view that the anticompetitive effects of regulation are not to ,be considered prevails in
other agencies, the ITT case 92 suggests that regulation by these
agencies may be insufficient for antitrust immunity.
4. Relationship to Federal Policy
Because Parker v. Brown does not call for any federal antitrust
exemption for category (3) regulation, the elements of the relationship between federal and state policies-(a) consistency with the
federal antitrust laws, (b) consistency with some other federal policy
but inconsistency with antitrust laws, and (c) total antipathy to federal policies-need only 'be evaluated with respect to the first two
analytical categories previously outlined, namely (1) governmental
operation of an economic activity and (2) governmental regulation
of private economic activity. There is, of course, little room for
argument about the validity of state action or regulation which is
consistent with the federal antitrust laws. Perhaps the most obvious
example of consistent regulation is state antitrust legislation which
parallels the federal statutes. It has long been the law that the
states may regulate even interstate commerce until Congress has
acted.9 3 And in the absence of an expressed intention to do so contained in the federal antitrust laws, -those statutes cannot be said to
"occupy 'the field" of regulation to the exclusion of consistent state
law.9 4 This position was squarely announced in California v. Zook,
as follows:
89. Gas Light Co. of Columbus v. Georgia Power Co., 440 F.2d 1135 (5th
Cir. 1971).
90. Washington Gas Light Co. v. Virginia Elec. & Power Co., 438 F.2d
248 (4th Cir. 1971).
91. Mathews v. Jersey Cent. Power & Light Co.-Request for Total Elec.
Home Rate, 5 TRADE REG. REP.
50,176 (NJ. Bd. of Pub. Util. Comm'rs,
Docket No. 727-615, June 21, 1973).
92. International Tel. & Tel. Corp. v. General Tel. & Electronics Corp.,
351 F. Supp. 1153 (D. Hawaii 1972).
93. Buck v. Kuykendall, 267 U.S. 307, 315 (1925); Vandalia R.R. v. Public Serv. Comm'n, 242 U.S. 255, 258-59 (1916); Missouri Pac. Ry. v. Larabee
Mills, 211 U.S. 612, 621-23 (1909); Cooley v. Board of Wardens of Port of
Philadelphia, 53 U.S. (12 How.) 299 (1852).
94. California v. Zook, 336 U.S. 725, 730, 733 (1949); cf. Hines v. Da
vidowitz, 312 U.S. 52, 78-79 (1941) (Stone, J., dissenting).
19751
ANTITRUST IMMUNITY
But whether Congress has or has not expressed itself,
the -fundamental inquiry, broadly stated, is the same: does
the state action conflict with national policy?...
We restate the familiar because respondents would
have us pronounce an additional rule: that when Congress
has made specified activity unlawful, "coincidence is as ineffective as opposition," and state laws "aiding" enforcement are invalid ...
. . .Neither the language nor the facts of the cases
cited support an approach in such marked contrast with
-thisCourt's consistent decisional bases.9 5
The state courts have reached the same conclusion.98
Parker v. Brown is probable authority for exemptions based on
both governmental operation of an economic activity and governmental regulation of private economic activity where ,the governing
state law is inconsistent with the federal antitrust laws but consistent
with some other federal policy (that is, category (1) (b) and (2) (b)
exemptions). The California prorate scheme in Parker, although in
contravention of federal antitrust policies, was comparable to the
federal Agricultural Adjustment Act. There was an additional
factor, however, in that the federal legislation also directed the
Secretary of Agriculture "to harmonize state and federal regula95. 336 U.S. at 729. This rule also leads to the almost forgotten conclusion that violations of consistent federal and state antitrust laws can result in
multiple liability, even beyond the normal treble damages in private federal litigation.
This has long been settled. Fox v. Ohio, 5 How. 410, announced uncertainly what United States v. Marigold, 9 How. 560, later made
clear: that "the same act might, as to its character and tendencies,
and the consequences it involved, constitute an offence against both
the State and Federal governments, and might draw to its commission
the penalties denounced by either as appropriate to its character in
reference to each." 9 How. at 569. [citing other cases.]
336 U.S. at 731. Contra, Mazur v. Behrens, 5 TRADE RE. REP. (1974 Trade
Oct. 27, 1972) (plaintiff may not reCas.) %75,070, at 96,788 (N.D. Ill.
cover under both federal and state antitrust laws, and thus obtain double recovery).
96. R.E. Spriggs Co. v. Adolph Coors Co., 37 Cal. App. 3d 653, 112 Cal.
Rptr. 585 (Ct. App. 1974); Illinois v. Henson Robinson Co., 5 TRADE Ra.
REP'. (1974-1 Trade Cas.) 1175,107 (IMI. Cir. Ct. 1974); Elray, Inc. v. Cathodic
Protection Serv., 5 TRADE RE . REP. (1974-1 Trade Cas.) 74,990 (Tex. Ct.
Civ. App. 1974); Texas v. Southeast Texas Chapter of Nat'l Elec. Contractors
Ass'n, 358 S.W.2d 711, 714 (Tex. Ct. Civ. App. 1962), cert. denied, 372 U.S.
969 (1963); Washington v. Sterling Theatres Co., 64 Wash. 2d 761, 394 P.2d
226 (1964); Wisconsin v. Allied Chem. &Dye Corp., 9 Wis. 2d 290, 101 N.W.
2d 133 (1960). The federal courts, of course, can exercise pendent jurisdiction
over such state statutory claims if they are asserted in conjunction with federal
antitrust claims. See United Mine Workers v. Gibbs, 383 U.S. 715 (1966).
246
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
tion," thus implying Congressional recognition and tolerance of coexisting state law.97 It remains unclear to what extent this second
factor was critical to the result in Parkerin view of the indiscriminate
dicta expressed by the Court.9 8 Nonetheless, it is clear that the complex evaluation of element (b) situations goes beyond the analysis of
Californiav. Zook where the relatively simple test for state authority
was one of conflict or consistency with federal policy. When one
has two relevant but inconsistent federal policies, it is first necessary
to determine predominance between them. 99
It does not seem ultimately helpful merely to add .the existence
of a state statute to the equation and balance a combined federal
and state regulatory pclicy versus a single federal antitrust policy.
The fundamental question is whether Congress has allowed room for
-the state to act at all. The decision inherently involves a preference, based on legislative history, statutory construction and possibly
an economic examination, between two federal legislative schemes.
This is precisely the problem confronted in Section II of this article.
In those predicaments where Congress did not state or strongly imply its -legislative -priorities, .the courts have resorted -to the doctrine
of primary jurisdiction -at least in part to defer a difficult choice.
Such a procedural resolution of -the problem is not practical in the
area of state law exemptions, for there is no rational reason to refer
the interpretation of congressional intent to a state agency.' 0 0
When a court looks -toParkerv. Brown for guidance in resolving
an element (b) exemption, there will be a temptation -to rely upon
the dicta and grant immunity merely because of the existence of
any federal statute that is in harmony with -the state scheme. It is
suggested that this is as uncritical an approach as is resort to the
doctrine of primary jurisdiction. The court's decision should turn,
instead, on whether the federal antitrust laws would prevail in the
face of the competing federal regulation standing alone. 1 1 In mak97. P. AREEDA, ANTrrRUST ANALYsIs 116 (2d ed. 1974).
98. "This history [of the raisin industry] shows clearly enough that the
adoption of legislative measures to prevent the demoralization of the industry
by stabilizing the marketing of the raisin crop is a matter of state as well as
national concern and, in the absence of inconsistent congressional action, is
a problem whose solution is peculiary within the province of the state." 317
U.S. at 367. Cf. Hecht v. Pro-Football, Inc., 444 F.2d 931, 936-37 (D.C. Cir.
1971), cert. denied, 404 U.S. 1047 (1972).
99. 444 F.2d at 946-47.
100. See Section hB infra.
101. Thus, the Court's decision in Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Ware, 414 U.S. 117 (1973), is not helpful on this issue and the second
factor in Parker,congressional recognition and tolerance of coexisting state law
19751
ANTITRUST IMMUNITY
ing this determination, the principles noted in Section II, for instances
where regulatory legislation is silent on antitrust issues, 10 2 should
normally control.
The Sherman and Clayton Acts are relatively aged legislation.
With regard to subsequently enacted federal regulatory schemes,
"[lt is a cardinal principle of construction that repeals by implication are not favored. When there are two acts upon the same subject, -the rule is to give effect to both if possible." 103 For matters that
would have constituted antitrust violations before enactment of a federal regulatory statute, that dogma would seem to require that the
regulatory statute be interpreted so as to authorize only regulations
conforming to -antitrust standards. Such a construction of a federal
statute is hardly a sufficient ground to support a Parker exemption
for state regulation pursuant to a comparable law. Significantly,
the Agricultural Adjustment Act relevant in Parker v. Brown was
not silent and specifically provided that "[t]he making of any . . .
[approved marketing] agreement shall not be held to be in violation
of any of -the antitrust laws of the United States, and any such agreement shall be deemed to be lawful .... -".4 Thus Parker is a case
of state consistency with a federal regulatory scheme which includes
an express antitrust exception, and its authority should be limited to
-thosecircumstances.
Element (c), a direct contradiction between the antitrust laws
and state regulation with no federal counterpart, was anticipated and
distinguished in California v. Zook: "The case would be different
if there were conflict in the provisions of the federal and California
statutes. But there is no conflict in terms, and no possibility of such
conflict, for the state statute makes federal law its own in -this par(text accompanying note 91 supra), is of only minimal significance. The provision in one federal statute for intentional collaboration with state regulation
does not establish an intended collaboration or federal tolerance with respect
to another federal statute, unless there is some independent basis upon which
to conclude that the first federal statute itself takes precedence over the second.
Cf. Hecht v. Pro-Football, Inc., 444 F.2d 931, 938 (D.C. Cir. 1971) (referring
to Judge Goldberg's opinion in Woods Exploration & Producing Co. v. Alumi-
num Co. of America, 438 F.2d 1286 (5th Cir. 1971)).
102. See notes 8-10 supra and accompanying text.
103. United States v. Borden Co., 308 U.S. 188, 198 (1939); cf. Ben v.
General Motors Acceptance Corp., 374 F. Supp. 1199, 1201 (D. Colo. 1974)
(Truth-in-Lending Act does not apply to business of insurance because it does
not "specifically relate" to it, nor does it supersede the McCarran-Ferguson
Act).
104. Agricultural Adjustment Act § 8(b), 7 U.S.C. § 608(b) (1970);
United States v. Borden Co., 308 U.S. 188, 200-01 (1939).
248
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
ticular."' 0 5 Despite broad language in Parker v. Brown, the Court
has never held to -the contrary and 'has applied the antitrust laws to
industries regulated only by the states.108 Such a result in United
States v. South-Eastern UnderwritersAssociationL0 7 led to the enactment of the McCarran-Ferguson Act in which Congress expressly
exempted state-regulated insurance companies from most federal antitrust restrictions.' 08 Nevertheless, even such federal legislation establishing an exception to the rule for element (c) cases must be
strictly construed in light of the strong presumption favoring a
national antitrust policy.' 0 9 It is precisely this policy that distinguishes element (c) situations from those like the one faced by the
Court in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 1 0
105. 336 U.S. at 735. See also Schweggman Bros. Giant Super Markets v.
Louisiana Milk Comm'n, 365 F. Supp. 1144, 1156-58 (M.D. La. 1973), affd
summarily, 94 S. Ct. 1920 (1974).
106. See, e.g., United States v. McKesson & Robbins, Inc., 351 U.S. 305
(1956); Schweggman Bros. Giant Super Markets v. Calvert Distillers Corp.,
341 U.S. 384, 386 (1951); United States v. South-Eastern Underwriters Ass'n,
322 U.S. 533 (1944). The Supreme Court and other courts have also applied
the antitrust laws where the states' regulatory powers are constitutionally
guaranteed, as in the case of the 21st amendment, unless state regulation is
clearly inconsistent. United States v. Frankfurt Distilleries, Inc., 324 U.S.
293 (1945); Schnapps Shop, Inc. v. H.W. Wright & Co., 5 TRADE REG. REP.
(1974-2 Trade Cas.)
75,306, at 95,983 (D. Md. 1973); Fairfield County
Beverage Distributors, Inc. v. Narragansett Brewing Co., 5 TRADE REG. REP.
(1974-2 Trade Cas.) 75,325 (D. Conn. July 19, 1974).
107. 322 U.S. 533 (1944).
108. Note 35 supra. See Securities and Exchange Comm'n v. Variable Annuity Life Ins. Co. of America, 359 U.S. 65, 68-69 (1959); Prudential Ins.
Co. v. Benjamin, 328 U.S. 408, 409-30 (1946). See also Addrisi v. Equitable
Life Assurance Soc'y, 5 TRADE REG. REP. ff 75,274 (9th Cir. Sept. 30, 1974);
American Family Assurance Co. v. Blue Cross, 486 F.2d 225 (5th Cir. 1973),
cert. denied, 94 S. Ct. 1609 (1974); Commander Leasing Co. v. Transamerica
Title Ins. Co., 477 F.2d 77 (10th Cir. 1973); Mitgang v. Western Title Ins. Co.,
5 TRADE REG. REP. (1974-2 Trade Cas.) 1 75,322 (N.D. Cal. Oct. 16, 1974);
Crawford v. American Title Ins. Co., 5 TRADE REG. REP. (1974-2 Trade Cas.)
75,320 (N.D. Ala. Apr. 17, 1974); Harrison v. Chicago Title Ins. Co., 5
TRADE REG. REP. (1974-2 Trade Cas.)
75,321 (D. Kan. July 31, 1974);
Schwartz v. Commonwealth Land Title Ins. Co., 5 TRADE REG. REP. (1974-2
Trade Cas.)
75,271 (E.D. Pa. Feb. 20, 1974); American Family Life Assurance Co. v. Aetna Life Ins. Co., 368 F. Supp. 859 (N.D. Ga. 1973); Steingart v. Equitable Life Assurance Soc'y of the United States, 366 F. Supp. 790
(S.D.N.Y. 1973); Nankin Hosp. v. Michigan Hospital Serv., 361 F. Supp.
1199 (E.D. Mich. 1973); Travelers Ins. Co. v. Blue Cross, 361 F. Supp. 774
(W.D. Pa. 1972), aff'd, 481 F.2d 80 (3d Cir. 1973), cert. denied, 414 U.S.
1093 (1974).
109. Notes 8-9 supra and accompanying text; Hecht v. Pro-Football, Inc.,
444 F.2d 931, 935 (D.C. Cir. 1971); cf. American Gen. Ins. Co. v. Federal
Trade Comm'n, 359 F. Supp. 887, 895-98 (S.D. Tex. 1973); Fry v. John Hancock Mut. Life Ins. Co., 355 F. Supp. 1151 (N.D. Tex. 1973).
110. 414 U.S. 117 (1973).
i
19751
ANTITRUST IMMUNITY
249
in which a state law"' permitting the litigation of an issue arising
out of a brokerage firm employment contract was enforced despite
a contrary New York Stock Exchange rule' 1 2 which required arbitration and which was authorized by section 6 of the Securities Exchange Act of 1934.113 In that case, Mr. Justice Blackmun examined the claim of federal preemption and concluded that:
Convenience in exchange management may be desirable,
but it does not support a plea for uniform application when
-the rule to be applied is not necessary for the achievement
of the national policy objectives reflected in the Act. Indeed, Congress, in the securities field [unlike the antitrust
field], has not adopted a regulation system
wholly apart
14
from and exclusive of state regulation."
The supremacy clause requires preemption of state law wherever
it "stands as an obstacle to the accomplishment and execution of the
full purposes and objectives of Congress."" 15 There can be no question that Congress' purpose in the area of competition has -been
clearly expressed." 6 A conflicting state law standing alone cannot
prevail.
The lower courts have regularly abused Parker v. Brown as authority for averting judicial eyes from flagrant antitrust violations,
some having minimal connections with state action. A more careful review of the law leads to the conclusion -that antitrust immunity
under the Parkerdoctrine is proper only for (1) actual governmental
operation of a non-proprietary activity within the scope of legislative
authority and for (2) private enterprises affirmatively and intentionally regulated by state law that is consistent with a federal policy
that prevails over antitrust policies. Determination of the existence
of these circumstances calls for a surgical separation of assertions
and appearances from reality. The collateral existence of state
action or regulation should not be relied upon as a touchstone.
The fact of state participatioA "only begins the analysis, for it
is not every governmental act that points a path to an antitrust
shelter."l117
111. California Labor Code § 229 (West 1970).
112. New York Stock Exchange Rule 347(b), 2 CCH NEW YoRK
EXCHNGE GuiDE
STOCK
2347 (1974).
113. 15 U.S.C. § 78f (1970).
114. 414 U.S. at 136-37.
115. Hines v. Davidowitz, 312 U.S. 52, 67 (1941); see Zschernig v. Miller,
389 U.S. 429, 441 (1968); Campbell v. Hussey, 368 U.S. 297, 302 (1961);
cf. Goldstein v. California, 412 U.S. 546 (1973).
116. Sherman Act § 1, 15 U.S.C. § 1 (1970).
117. Woods Exploration & Producing Co. v. Aluminum Co. of America,
250
CASE WESTERN RESERVE LAW REVIEW
B.
[Vol. 25:221
PrimaryState Jurisdiction
Primary jurisdiction in a federal agency, apart from exclusive
jurisdiction, has been justified, as noted in Section II, by presumptions of agency expertise and by recognition of the need to formulate uniform regulatory enforcement." 8 Exclusive jurisdiction may
be based upon express statutory language or the conclusion that a
regulatory scheme is so pervasive that it is inherently inconsistent
with judicial antitrust intervention, even though the agency itself
may be obligated to take competitive principles into account in its
consideration of the public interest. These rationales for both primary and exclusive jurisdiction are applicable only on the federal
level. There has developed, however, an ill-conceived theory of
state primary jurisdiction.
The state primary jurisdiction theory originated in the case which
most notably misconstrued the scope of the Parker doctrine, Washington Gas Light Co. v. Virginia Electric & Power Co." 9 This case
-held that state action could be inferred from unapproved private actions by a public -utility when the actions were within a regulatory
commission's range of authority, even where there was no showing
of conscious failure to regulate or any examination by the commission of the utility's challenged activities. The posture of -this case
presents a category (3)(c) situation in the analytical outline constructed above (that is, mere governmental approval of private economic activity that is totally antipathetic to federal policies). Parker
v. Brown is of no precedential value for such an exemption. In
fact, the Court's discussion in Parker, stripped of subsequent lower
court gloss, is quite -tothe contrary. Nevertheless, the Fourth Circuit
in Virginia Electric went beyond this fundamental error and volunteered the potentially more harmful observation that in any event the
plaintiff should be relegated to the state regulatory commission for
relief.'
20
The court in Virginia Electric sought to turn adversity to advantage in its strained reasoning when it pursued a -three step progression from (1) administrative inaction 2 ' to (2) administrative
438 F.2d 1286, 1294 (5th Cir. 1971), citing George R. Whitten, Jr., Inc. v.
Paddock Pool Builders, Inc., 424 F.2d 25, 30 (1st Cir. 1970).
118. Text accompanying notes 11-20 supra.
119. 438 F.2d 248 (4th Cir. 1971), discussed in text at notes 46-53 supra.
120. Id. at 254.
121. "It is just as sensible to infer that silence means consent, i.e., approval." Id. at 252.
19751
ANTITRUST
IMMUNITY
authority 22 and finally to (3) a concept of primary state jurisdiction, albeit not labeled as such.' 23 Thus, primary jurisdiction here
turns Parker v. Brown on its head. State action immunity may arguably apply to private persons complying with affirmative state
regulation, 'but actions merely approved and not compelled by state
regulation are not protected. Yet Virginia Electric holds that a
state regulatory body must be provided an opportunity to act upon
previously unregulated private conduct before a federal court will
impose antitrust liability, even for past activities preceding agency
124
review.
This premise completely misconstrues the circumscribed nature
of the Parker holding which permits, but does not encourage, some
state deviations from national competitive standards. It also confuses antitrust enforcement with an unsophisticated version of the
doctrine of exhaustion of administrative remedies, 125 a failing that
has been repeated in at least one subsequent decision.' 2 6 The fault
with the latter concept in this context is that it applies a procedural
tool to obfuscate more important questions of substantive rights. It
is difficult to see this fault clearly when the viewer's perspective is
distorted by a defective perception of the substantive principles, as
the court's perspective was in Virginia Electric. Therefore, once
the premise is understood that -there is no exemption for private conduct not compelled by a governmental authority, even where the
agency could effectively regulate if it so chose, it becomes clear that
an aggrieved competitor (for example) may have -two separate rights.
The first is, depending upon state law, the right -to seek active state
regulation, and the second is to enforce federal antitrust claims. Despite insinuations in Virginia Electric and its progeny, 2 7 these are
122. The commission eventually, after the period for which the antitrust action sought relief, "spoke affirmatively and first modified and finally
ended the promotional practices [of the defendant] upon which the suit was
based." Id.
123. "The antitrust laws are a poor substitute, we think, for plaintiff's failure to promptly protest to the SCC and to seek the administrative remedy ultimately shown to have been available and effective." Id. But see CSI/Communication Syss., Inc. v. South Cent. Bell Tel. Co., 346 F. Supp. 487 (E.D.
Tenn. 1971), where the court found primary jurisdiction in the appropriate
state or federal agency, and not in the district court.
124. 438 F.2d at 254.
125. See generally 3 K. DAvis, supra note 3, §§ 19.01-.09, at 1-55.
126. Communication Brokers of America, Inc. v. Chesapeake & Potomac
Tel. Co., 370 F. Supp. 967 (W.D. Va. 1974). See generally Borden, Inc.
v. FTC, 495 F.2d 785, 786-87 (7th Cir. 1974).
127. See, e.g., Communication Brokers of America, Inc. v. Chesapeake &
Potomac Tel. Co., 370 F. Supp. 967 (W.D. Va. 1974); Business Aides, Inc.
252
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
neither alternative nor necessarily sequential rights. This conclusion
has been expressed in Woods Exploration& ProducingCo. v. Aluminum Company of America,128 where the court stated: " . . . While
state remedies may exist to correct this conduct, such activities also
may state a cause of action under the federal antitrust laws."' 129
There is no justification for primary state administrative agency
jurisdiction in these circumstances. If private action has occurred
without concurrent regulation, the subsequent invocation of -the jurisdiction of a state regulatory body cannot conceivably provide the
essential element of compulsion for the -prior private action -to have
qualified at the time as state action. The Parker opinion made it
clear -that "a state does not give immunity -to those who violate the
Sherman Act . . . .by declaring their action is lawful.' 30 It is
difficult -to imagine a more transparent set of circumstances for -that
parameter of the Parkerdoctrine.
In Business Aides, Inc. v. Chesapeake and Potomac Telephone
Co. of Virginia'3 ' the court purported to follow Virginia Electric on
the exhaustion of remedies principle. The Business Aides court
found, however, that the utility's refusal -to provide certain services
which was challenged under sections 1 and 2 of the Sherman Act
was pursuant to a tariff approved by the state regulatory agency.
Without indicating any recognition of the -principle of dual federal
and state rights alluded to in Woods,'3 2 the court concluded that
"[tlhe Virginia Constitution and Code provide an adequate remedy . . .,,133 and the "public utility is not required to seek revision of its tariff for the convenience of a customer.' 3 4 Rather
the burden is on the customer to challenge the tariff. Within a few
months, Communication Brokers of America, Inc. v. Chesapeake
v. Chesapeake & Potomac Tel. Co., 480 F.2d 754 (4th Cir. 1973), aff'g 339
F. Supp. 1391 (E.D. Va. 1972); see also CSI/Communication Syss., Inc.
v. South Cent. Bell Tel. Co., 346 F. Supp. 487 (E.D. Tenn. 1971).
128. 438 F.2d 1286 (5th Cir. 1971).
129. Id. at 1296. The language used in another context in Carnation Co.
v. Pacific Westbound Conference, 383 U.S. 213 (1966), to the effect that a
plaintiff should not be able to receive a dual recovery of antitrust damages
plus Federal Maritime Commission "reparations" is not apposite. Few state
regulatory laws provide for damage awards, and in any event the situation
posed in this article involves the laws of two sovereigns.
130. 317 U.S. at 351.
131. 480 F.2d 754 (4th Cir. 1973), aff'g 339 F. Supp. 1391 (E.D. Va.
1972).
132. 438 F.2d 1286 (5th Cir. 1971).
133. 480 F.2d at 757.
134. Id. at 758.
1975]
ANTITRUST IMMUNITY
and Potomac Telephone Co. of Virginia1 35 purported to follow both
Virginia Electric and Business Aides, Inc. The holding was "...
that this action should at this time be dismissed because of the plaintiff's failure to pursue its administrative remedies in the first instance."'13 6 The court left no doubt as to its primary jurisdiction
rationale because it rejected the ambit-of-regulation interpretation
of Parkerwhich had been announced in Washington Gas Light Co.
v. Virginia Electric & Power Co. The Communication Brokers
court stated:
...[A]rguably
the expansive effect given to the Parker
doctrine in Washington Gas Light Co. would justify a similar ruling in the case at bar irrespective of plaintiff's failure
to pursue his administrative remedies. But such a reading
of Washington Gas Light Co. is probably not justified in
light of the approach taken in Business Aides, Inc., and accordingly at -this time the court declines to accept defendant's argument that summary judgment should be granted
on the basis of a "state action" exemption of its activities. 3
Nevertheless, this court is of the opinion that Washington
Gas Light Co. and Business Aides, Inc., taken together,
provide support for the conclusion in this case that the antitrust laws should not be utilized in the first instance in an
area in which the state has provided for comprehensive regulation and redress of grievances.
3. The Supreme Court limited the doctrine of "state exemption"
in Parker.... It is thus possible that after pursuing its adminis37
trative remedies, plaintiff could proceed with an anti-trust action.1
This series of Fourth Circuit cases has created total chaos in the
state action area. Proceeding from an unsupported interpretation
of Parker v. Brown, the Communication Brokers court constructed
an express doctrine of state agency primary jurisdiction while hesitating, ironically, to endorse the original expansion of the Parker
doctrine and refusing to reach the issue whether an antitrust action
might or might not be appropriate in any event. The question that
the court ignored, the answer to which would illuminate the fault in
its approach, is why must the antitrust action be delayed until after
seeking state administrative relief?
This question was asked in Marnell v. United Parcel Service of
America, Inc.138 .where the court was faced with a motion for a stay
135. 370 F. Supp. 967 (W.D. Va. .1974).
136. Id. at 968.
137. Id. at 969-70 (emphasis added). Accord, Industrial Communications
Sys., Inc. v. Pacific Tel. & Tel. Co., 5 TRADE RE. REP. (1974-2 Trade Cas.)
75,291 (9th Cir. Oct. 4, 1974).
138. 260 F. Supp. 391 (N.D. Cal. 1966).
254
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
to refer the antitrust case to the California Public Utilities Commission. The court first considered whether -the state commission would
review past rates or would act only prospectively. By way of comparison, -the court noted that -the Interstate Commerce Commission
does not pass upon the reasonableness of past rates. 139 However,
it failed to point out an important distinction: if the ICC acted retroactively, it might confer immunity from the antitrust laws upon
past rates under express federal statutory provisions, 140 whereas
comparable state approval of past rates would not seem sufficient
under Parkerv. Brown to imunize private wrongful action not compelled by the government. 14' Therefore, deferring to the state agency could in no way affect the validity of the antitrust challenges. 14 2
The Marnell opinion did not stop with that comparison, but
based its holding on -the most significant primary jurisdiction consideration, namely whether agency action could either materially aid
the court or alternatively have a determinative effecl on the antitrust
suit. The court found that it was questionable whether -the Commission would hold a hearing at all. Thus, the first alternative, upon
which the Supreme Court has recently relied in ordering trials stayed
pending advice from federal administrative agencies,' 43 was not relevant. Even if an administrative hearing were -held, -the district court
found that -the Commission would decide only whether the rates and
practices under attack were "just, reasonable and not unduly preferential" under state regulatory statutes and would make no decision
as to a violation of the federal antitrust laws.' 4 As to the second
139. Id. at 413.
140. Note 22 supra.
141. See text at note 129 supra.
142. Another case considering the primary jurisdiction of the California
Public Utilities Commission was decided on an injunction issue when the alleged
antitrust violation remained only a threat. There this problem, of course, did
not arise. Industrial Communications Sys., Inc. v. Pacific Tel. & Tel. Co., 5
TRADE REG. REP. (1974-2 Trade Cas.) 1175,291 (9th Cir. Oct. 4, 1974).
In
such a situation the fact that a condition precedent to the threatened conduct
is state regulatory agency action seems logically to require the conclusion that
the threat is not sufficiently imminent to create a justiciable case, rather than
the conclusion that the state agency should acquire primary jurisdiction
vis- -vis a federal antitrust suit. That holding by the district court was expressly reversed by the Ninth Circuit. Cf. United States v. Michigan Nat'l
Corp., 95 S. Ct. 10 (1974).
143. Chicago Merchantile Exch. v. Deaktor, 414 U.S. 113 (1973); Ricci v.
Chicago Mercantile Exch., 409 U.S. 289 (1973).
144. Phonetele, Inc. v. Public Util. Comm'n, 5 TRADE REG. REP. (1974
Trade Cas.) f 75,013 (Cal. Sup. Ct. 1974), and Northern Cal. Power Agency
v. Public Util. Comm'n, 5 Cal. 3d 370, 379, 486 P.2d 1218, 96 Cal. Rptr. 18
1975]
ANTITRUST IMMUNITY
alternative, the court concluded that action by the state commission
"... would be neither useful nor determinative upon the issue of
monopoly presented in this case. . . -145 This realization resulted
in the final conclusion:
For the foregoing reasons, referral of the issue as requested by defendants for an agency determination would
not materially assist the Court in disposing of this case.
The cost, time and effort of such a referral would seriously
attenuate the purpose of the antitrust laws under which this
suit is brought.1 46
This result would be appropriate even where state agencies do evaluate the effects of an activity on competition because those evaluations are usually based on state rather than federal laws. 14 7 In addition, constructions of federal statutes by state administrative agencies may not, under the supremacy clause, usurp the jurisdiction of -the
federal judiciary, the recognized repository of antitrust expertise.148
It is essential to remember that cases dealing with federal primary
jurisdiction are not reliable authority for state primary jurisdiction
cases,' 49 because federal agencies may be obligated to consider the
federal antitrust laws'6 0 and their decisions on antitrust issues may
strongly influence subsequent judicial action.' 6 '
(1971), have since held that the same commission involved in Marnell would
have to weigh carefully the competitive factors "Ew]here, as here, a finding in
favor of the utilities will result in a potential threat to free competition. . ....
5 TRADE REG. RE'. (1974-1 Trade Cas.) f 75,013, at 96,482 (Cal. Sup. Ct.
1974). See also Industrial Communications Sys., Inc. v. Pacific Tel. & Tel.
Co., 5 TRADE REG. REP. (1974-2 Trade Cas.) 75,291 (9th Cir. Oct. 4, 1974).
145. Marnell v. United Parcel Serv. of America, Inc., 260 F. Supp. 391, 414
(N.D. Cal. 1966).
146. Id. The same conclusion was reached in a subsequent decision by the
court, although it did not cite Marnell. BBD Transp. Co. v. United States
Steel Corp., 5 TRADE REG. RP. (1974-2 Trade Cas.) 1 75,266 (N.D. Cal.
Oct. 1, 1974).
147. See International Tel. & Tel. Corp. v. General Tel. & Electronics
Corp., 351 F. Supp. 1153, 1202 (D. Hawaii 1972): "Rates are the meat, bread
and potatoes of state commission fare. Antitrust restraints are not." But see
Northern Cal. Power Agency v. Public Util. Comm'n, 5 Cal. 3d 370, 486 P.2d
1218, 96 Cal. Rptr. 18 (1971).
148. The apparent ease of ignorantly transferring federal precedent is
demonstrated in Industrial Communications Sys., Inc. v. Pacific Tel. & Tel.
Co., 5 TRADE REG. Rm'. (1974-2 Trade Cas.) 1 75,291 (9th Cir. Oct. 1, 1974).
149. See note 13 supra. But see Industrial Communications Sys., Inc. v.
Pacific Tel. & Tel. Co., supra note 148.
150. See notes 28-29 supra. But see Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 489 F.2d 203, 212 (9th Cir. 1973), where the court used similar
reasoning to that of the text to deny the CAB primary jurisdiction.
151. This influence is subject to valid criticism. See notes 25-26 supra and
accompanying text.
256
CASE WESTERN RESERVE LAW REVIEW
[Vol. 25:221
A proper approach to the overall problem is well demonstrated
in United States v. Morgan Drive Away, Inc.,152 where the defendants urged:
. . . -the Court to refer the issues raised by their alleged
conduct wholly -within individual states to state agencies
having authority over the for-hire transportation of mobile
homes. The only purpose that would be served by such
deferral to state agencies would be to ascertain whether defendants' conduct is entitled to immunity under the holding
of Parker v. Brown, 317 U.S. 341 (1943). Parker confers antitrust immunity upon conduct which is directed,
commanded or imposed by the state legislature acting as
sovereign. Mere state approval of the defendants' actions
would not shield -their alleged anti-competitive conduct
-from antitrust attack. See Marnell v. United Parcel Service, 260 F. Supp. 391 (N.D. Cal. 1966). Deferral to
state agencies will be unnecessary since defendants can be
easily protected from prejudice at trial by the exclusion of
evidence of conduct immunized by Parker. This course
of proceeding is preferable to the
delay that would accom153
pany deferral to stage agencies.
IV.
CONCLUSION
The federal courts have not been sufficiently critical in their
evaluations of Parker v. Brown defenses. State action is a complex
concept, and only limited categories of state action qualify for antitrust immunity. If a state agency has previously acted, and the defendant's challenged conduct was allegedly within the scope of that
state regulation, it is the function of the court to hear evidence and
then weigh the elements of the state action against the Parker analysis outlined in this article. If the state has not yet acted, and if'
there is nothing other -than latent authority in the regulatory agency,
there is no occasion to measure -thestatus of state law at all.
In dealing with state action claims, the courts have confused
judicial precedents dealing with federal regulatory schemes with
-those appropriate for state regulation situations. Primary jurisdiction
is an historical federal procedural device which contains inherent inconsistencies and is subject to numerous criticisms, but even within
its proper limitations it bears no relation to the balancing of state
regulation against the -federal antitrust laws. The nature of the limited
antitrust immunity provided by state law under Parker v. Brown,
152. 5 TRADE REG. REP. (1974 Trade Cas.)
(D.D.C. 1974).
153. Id. at 96,000.
74,888, at 95,999-96,000
19751
ANTITRUST IMMUNITY
257
as contrasted with the various grounds for exemption based on federal regulation, makes a finding of primary jurisdiction in a state
agency wholly inappropriate for federal antitrust litigation. State
agencies, by definition, -have no duty to consider- federal antitrust
policies in their decision processes, and many have no restrictions on
their discretion under state antitrust law. Primary jurisdiction has
not served efficiently to extend antitrust enforcement to federally
regulated industries. It should not be tolerated in the resolution of
the conflict between state regulatory schemes and the national economic policy favoring competition.' 54
United States v. Morgan Drive Away, Inc. presents a balanced
resolution of the problem. The federal court should retain and exercise its antitrust jurisdiction, and the burden of proving valid
Parker defenses should rest squarely on the defendant.
154. To conclude otherwise not only violates sound legal analysis but magnifies the "danger" against which the Supreme Court warned in United States
v. Marine Bancorporation, Inc., 94 S. Ct. 2856, 2879 (1974), "of subjecting the enforcement of the [federal] antitrust laws to the policies of a
particular ... [state] regulatory official or agency... "